General Motors of Canada Co. is transferring the longevity risk for $1.8 billion in pension plan liabilities through a group annuity buyout.
Jennifer Wright, director of communications at GM Canada, said in a statement that the automaker has been taking steps to reduce risk and strengthen its retirement plans with a view to protecting the pension benefits of members. “Moving these retired members to insurance companies helps to support the protection the pension benefits of these retirees into the future, while remaining members continue to enjoy a well-funded plan.”
The transaction was conducted by Willis Towers Watson and pertains to more than 6,000 members of the GM Canada salaried pension plan who retired prior to June 1, 2020. Brookfield Annuity Co., iA Financial Group and Sun Life Financial Inc. are each responsible for $100 million, $600 million and $1.1 billion, respectively. It’s the largest in-kind transfer in Canadian history, according to a press release. In 2012, General Motors Inc. transferred its U.S. pension risk through an annuity buyout valued at US$26 billion.
“This deal is groundbreaking because it demonstrates that Canadian insurers can now effectively meet plan sponsors’ needs for jumbo transactions, a milestone in the evolution of pension-risk transfers in Canada,” said Marco Dickner, retirement risk-management leader for Canada at Willis Towers Watson, in the release. Brent Simmons, head of defined benefit solutions at Sun Life, said, “We’ve finally cracked the [CA]$1-billion mark for a single insurer in a single day with Sun Life’s [CA]$1.1-billion share of the deal.”
Éric Jobin, executive vice-president of group benefits and retirement solutions at iA Financial Group, noted the deal “highlights our capacity to support clients of all sizes and help them to transfer risks through the purchase of annuities.” And Paul Forestell, president and chief executive officer at Brookfield Annuity, added, “This transaction demonstrates our ability as an insurer to collaborate on creative solutions that help employers provide increased benefit security and peace of mind for their annuitants.”
Unifor didn’t respond to Benefits Canada’s request for a comment.