Managing Defined Benefit Plan Risk



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Mercer’s innovative tools, solutions, and expertise on pension assets and liabilities help manage and reduce defined benefit plan risk.

MANAGING DEFINED BENEFIT PLAN RISK IS CRITICAL FOR TODAY’S ORGANIZATIONS

Market volatility, changes to inflation and interest rates, and rising longevity are just some of the factors that create financial risk in defined benefit plans. If not managed, defined benefit plan risk will impact credit ratings, access to capital, share prices, and plans for growth, as well as divert attention and valuable resources from core business strategy to pension issues.

Many defined benefit plan sponsors have closed plans to new entrants or frozen retirement benefits for all participants. However, these measures do not eliminate defined benefit plan risk. Substantial existing retirement benefit obligations and investment strategies may still leave the company exposed. Defined benefit plan fiduciaries can also be left with significant exposure to the sponsor covenant and market risk, while members may face reduced retirement benefits.

 

TIME TO ACT ON PENSION RISK

Our whitepaper explores the options available for taking advantage of pension funded status improvements, while mitigating the potential headwinds on the horizon.

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We help our clients understand the impact of defined benefit plan risk. We develop pension risk strategies that support business objectives and member outcomes.

HOW MERCER CAN HELP

We work with our clients to help them understand the impact of defined benefit risk on their business and on benefit security. Then we determine a pension risk strategy that will support business objectives and member outcomes. Given the size of the defined benefit plan obligation, that may involve building a roadmap to a defined, longer-term state as short-term solutions can be expensive.

Using that roadmap as a decision-making framework, we support our clients through the design and implementation of asset and liability management strategies incorporating techniques such as:

 

  • Dynamic asset de-risking, as is embedded in our own Mercer Dynamic De-risking Solution, a market-leading and fully automated defined benefit plan risk management solution
  • Proactive liability management techniques, involving innovative defined benefit plan design and member options strategies such as pension lump sum cash-outs and pension risk transfers
  • Alternative pension financing strategies

To capitalize on pension risk reduction or pension risk transfer opportunities may require more sophisticated resources than most organizations can dedicate. We are well positioned to help by offering a full range of services from monitoring tools and providing advice on execution through to fully delegated implemented options

 

Mercer has unrivalled experience in managing defined benefit plan risk:

 

  • We have a deep understanding of both pension plan assets and liabilities, and we use this knowledge to manage defined benefit plan risk to meet business objectives.
  • We have actuaries and investment consultants based around the world, with a cadre of dedicated financial risk experts in all major defined benefit plan markets.
  • Globally, we manage $86bn in assets for more than 500 clients through our delegated solutions, which cover the whole process from manager selection to dynamic de-risking strategies.

We have unrivalled experience in supporting pension risk transfers through pension buyouts, buyins, and longevity swap transactions.

Through this combination of consulting experience and solutions, our goal is to make sure that our clients focus on their core business by taking the pain out of pension planning and provision and managing and reducing defined benefit plan risk. In this way, we help ensure that our fiduciary clients deliver better retirement outcomes for members.

GLOBAL PENSION BUYOUT INDEX

The Global Index allows you to monitor the general trend in the pricing of pension annuity transactions.


PLAN SPONSORS LOOK TO OFFLOAD PENSION RISKS

The options for plan sponsors

 


FOUR FORCES COMPEL ACTION FOR PENSION MANAGEMENT STRATEGIES

The convergence of four forces present sponsors with some short-term opportunities to manage pension risk while potentially avoiding longer-term challenges

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Mercer experts provide leading-edge thinking and research to help our clients address their defined benefit plan challenges.

KEY ARTICLES AND VIDEOS

Access the latest trends in our country surveys:

TOP TIPS FOR MANAGING DB RISK

Mercer identifies 10 pension risk management priorities for DB Plans in 2014

 

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Mercer’s innovative tools support timely and effective decision-making for defined benefit plans.

OUR TOOLS

          

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MANAGING DB PLAN RISK

Mercer’s innovative tools, solutions, and expertise on pension assets and liabilities help manage and reduce defined benefit plan risk.

MANAGING DEFINED BENEFIT PLAN RISK IS CRITICAL FOR TODAY’S ORGANIZATIONS

Market volatility, changes to inflation and interest rates, and rising longevity are just some of the factors that create financial risk in defined benefit plans. If not managed, defined benefit plan risk will impact credit ratings, access to capital, share prices, and plans for growth, as well as divert attention and valuable resources from core business strategy to pension issues.

Many defined benefit plan sponsors have closed plans to new entrants or frozen retirement benefits for all participants. However, these measures do not eliminate defined benefit plan risk. Substantial existing retirement benefit obligations and investment strategies may still leave the company exposed. Defined benefit plan fiduciaries can also be left with significant exposure to the sponsor covenant and market risk, while members may face reduced retirement benefits.

 

TIME TO ACT ON PENSION RISK

Our whitepaper explores the options available for taking advantage of pension funded status improvements, while mitigating the potential headwinds on the horizon.

HOW MERCER CAN HELP

We help our clients understand the impact of defined benefit plan risk. We develop pension risk strategies that support business objectives and member outcomes.

HOW MERCER CAN HELP

We work with our clients to help them understand the impact of defined benefit risk on their business and on benefit security. Then we determine a pension risk strategy that will support business objectives and member outcomes. Given the size of the defined benefit plan obligation, that may involve building a roadmap to a defined, longer-term state as short-term solutions can be expensive.

Using that roadmap as a decision-making framework, we support our clients through the design and implementation of asset and liability management strategies incorporating techniques such as:

 

  • Dynamic asset de-risking, as is embedded in our own Mercer Dynamic De-risking Solution, a market-leading and fully automated defined benefit plan risk management solution
  • Proactive liability management techniques, involving innovative defined benefit plan design and member options strategies such as pension lump sum cash-outs and pension risk transfers
  • Alternative pension financing strategies

To capitalize on pension risk reduction or pension risk transfer opportunities may require more sophisticated resources than most organizations can dedicate. We are well positioned to help by offering a full range of services from monitoring tools and providing advice on execution through to fully delegated implemented options

 

Mercer has unrivalled experience in managing defined benefit plan risk:

 

  • We have a deep understanding of both pension plan assets and liabilities, and we use this knowledge to manage defined benefit plan risk to meet business objectives.
  • We have actuaries and investment consultants based around the world, with a cadre of dedicated financial risk experts in all major defined benefit plan markets.
  • Globally, we manage $86bn in assets for more than 500 clients through our delegated solutions, which cover the whole process from manager selection to dynamic de-risking strategies.

We have unrivalled experience in supporting pension risk transfers through pension buyouts, buyins, and longevity swap transactions.

Through this combination of consulting experience and solutions, our goal is to make sure that our clients focus on their core business by taking the pain out of pension planning and provision and managing and reducing defined benefit plan risk. In this way, we help ensure that our fiduciary clients deliver better retirement outcomes for members.

GLOBAL PENSION BUYOUT INDEX

The Global Index allows you to monitor the general trend in the pricing of pension annuity transactions.


PLAN SPONSORS LOOK TO OFFLOAD PENSION RISKS

The options for plan sponsors

 


FOUR FORCES COMPEL ACTION FOR PENSION MANAGEMENT STRATEGIES

The convergence of four forces present sponsors with some short-term opportunities to manage pension risk while potentially avoiding longer-term challenges