Prudential Completes Nation's First Buy-in Transaction
Prudential, along with BCG Terminal Funding Company, achieved a breakthrough in the pension risk transfer marketplace, completing the first-ever Buy-in sale to a U.S. plan sponsor on May 20.
This landmark transaction features Prudential's newest addition to its pension risk transfer product platform—Prudential's Portfolio Protected Buy-in.
With this separate account structure, the plan sponsor—Hickory Springs Manufacturing Company—transferred its pension risk to Prudential while preserving its plan funded status. Portfolio Protected Buy-in does not trigger settlement accounting or accelerate pension contributions.
"Prudential's Portfolio Protected Buy-in enables us to deliver a flexible solution that met our client's unique needs," explains Glenn O'Brien, Managing Director, Pension and Structured Solutions. "Being the first to make this type of sale in the U.S. is quite a distinction, and we're looking forward to many more."
Benefits of Buy-In
- Serves as a liability-matching asset of the plan
- Provides guaranteed payments to the plan to match the covered liability
- Preserves plan funded status
- Transfers investment, benefit-option and longevity risk to Prudential
- Provides two levels of security—an insurance company guarantee plus a separate account asset portfolio
- Offers conversion to Prudential's Portfolio Protected Buy-out
- Does not trigger settlement accounting
- Enables plan sponsors to take a phased approach to risk reduction on the schedule of their choice
Innovations in the U.S. Market
- U.S. plan sponsors are seeking ways to reduce pension risk in ever-increasing numbers, and Prudential stands ready to assist.
- Prudential's Pension Risk Transfer team is firmly committed to innovation in risk transfer strategies, recognizing the need to offer a variety of solutions to meet plan sponsors' wide-ranging requirements.
- Our portfolio of risk transfer strategies provides plan sponsors with more alternatives and additional security for these vital transactions. And just as importantly, our solutions help sponsors fulfill their fiduciary obligations, as they are backed by the financial strength of a Global Fortune 500 company—Prudential.
- Combining our core strengths in insurance and asset management, we are the first insurer to make separate account risk transfer strategies available to all clients— regardless of size.
- And now we are the first to deliver a Buy-in solution to a U.S. plan sponsor.
We invite you to reach out to our Pension Risk Transfer team for more information on how we can help you achieve your pension plan goals.
Please click here to see Dylan Tyson, VP and Head of Prudential Retirement’s Pension Risk Transfer Business, discuss buy-in and the nation’s first transaction.
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Buy-in in the United Kingdom
- While Buy-in is new to the U.S., it's a proven commodity in the U.K.
- More than $8 billion of U.K. pension risk has changed hands through Buy-in since January, 2009
- Through Buy-in, U.K. plan sponsors have transferred risk to:
- Reduce the size of the plan relative to the firm
- Create predictable contributions and earnings, and free cash flow
- Manage business cycle risk
- Address the asymmetry of pension risk
- Transfer unrewarded risks, particularly longevity