Emergence of the Big Bang Strategy | Mercer

Emergence of the Big Bang Strategy Mercer U.S.

Our Thinking / Wealth / Defined Benefit Pension Plans

Emergence of the Big Bang Strategy
Calendar09 March 2018

DB Pensions Plans ― 2017 Review and Outlook for 2018

Since the global financial crisis, gradual de‑risking emerged as a trend through various investment and risk transfer measures with mixed results. In 2017, increased carry costs and economic conditions created new opportunities for defined benefits (DB) plan sponsors to take action.

The Evolution from Hurry Up and Waiting Big Bang!

Combined pre‑funding and risk transfer actions have typically been economically positive, primarily due to the substantial increase in PBGC premiums and other DB maintenance costs. However, pension sponsors are growing tired of market and regulatory volatility and are contemplating bolder action. What is more, tax reform will drive accelerated pre‑funding make a tipping point imminent. 

The following key factors are driving this pivotal change:

  • Increasing Pension Benefit Guaranty Corporation (PBGC) premiums
  • The reduction of corporate taxes
  •  The potential flood of repatriated cash for global sponsors
  • Pension sponsors are suffering from volatility fatigue
  • A more selective insurance market with the potential first-mover advantage
  • The never-ending regulatory roundabout

 

Make informed decisions with us. Assess where the risk lies and structure your operational model to tackle it. 

 

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