Data & ResearchNovember 19, 2015

Pension Buy-Out Market Still Red Hot

The third quarter of 2015 was the first time $3 billion in pension buy-out sales were recorded in consecutive quarters.

Reported by Rebecca Moore

In the third quarter of 2015 U.S. group pension buy-out sales reached $3.2 billion, according to a LIMRA Secure Retirement Institute sales survey.

Following second quarter sales of $3.8 billion, this marks the first time consecutive quarters experienced $3 billion in sales.

LIMRA says traditionally, pension buy-out sales tend to spike in the fourth quarter with far less activity in the first three quarters. In 2015, however, pension buy-out sales have eclipsed $8 billion for the first nine months of the year—a 415% increase over the $1.53 billion in sales for the first nine months of 2014. Sales in the first three quarters of 2013 totaled $1.43 billion, and sales in the first three quarters of 2012 totaled $1.42 billion.

“We’ve seen 195 new contracts so far in 2015, compared to 159 contracts in the first nine months of 2014,” notes Michael Ericson, research analyst for LIMRA Secure Retirement Institute.

Trends show more small and medium-sized companies are seeking pension buy-outs, LIMRA says. Years of low interest rates and increasing premiums charged by the Pension Benefit Guarantee Corporation (PBGC) has compelled more organizations to consider transferring their pension risk to a group annuity.

To date, 13 financial services companies provide group annuity contracts for this market.