Sun Life Financial has completed the first conversion of an annuity buy-in to an annuity buyout in Canada, according to a news release from the insurer.
The annuity buy-in was purchased by a plan sponsor in 2009 as a way “to create certainty around the cost of providing benefits to a portion of its retirees and, over the last three years, the plan sponsor purchased additional coverage,” says the insurer.
The sponsor is now converting the annuity buy-in to an annuity buyout and, by doing so, has “completely transitioned responsibility for its retirees to Sun Life,” the release explained.
“This is a great example of the flexibility of an annuity buy-in,” said Brent Simmons, senior managing director, defined benefit solutions, with Sun Life. “Because the annuity buy-in does not trigger a top-up contribution or an accounting settlement, plan sponsors can transfer all or a portion of their retiree pension risk to an insurance company, even if the plan is underfunded. This can be a great risk management solution, especially for plan sponsors that are thinking about winding up their plans in the future and want to start reducing their pension risk now.”
According to Sun Life, many plan sponsors now view annuities as a superior fixed income asset class and are considering transitioning assets from traditional bond portfolios to annuities.