Emergence of the Big Bang Strategy | Mercer

The Latest in De-Risking Strategy for Your Defined Benefit Pension Plan 2017

Increased carry costs and economic conditions create new opportunities for defined benefits (DB) plan sponsors to take actions such as executing risk transfer actions, locking in gains and cutting risk or reducing contributions and expense.

However, when coupled with the current uncertainties in the political and economic landscapes, and considering potential tax changes, we see an inflection point emerging for corporate pension sponsors to take bolder actions. We see full plan termination as the potential next “big bang” strategy for pension plan sponsors.

Key factors driving the pivotal change

1. Increasing Pension Benefit Guaranty Corporation (PBGC) premiums
2. Prospect of lower corporate taxes (making tax-deductible pension contributions more valuable now)
3. Potential opportunity for repatriated cash from global operations
4. Pension sponsors suffering from volatility fatigue
5. A strong insurance market appetite with potential first mover advantage
6. Persistent pension regulatory change