Pension Indicator
Pension Indicator Updated for August 31, 2023
Record Popularity of Group Annuity Purchases
By: Matthew Klein, Vice President & Senior Consulting Actuary, USICG
It’s football season. While Hank Williams was asking, “Are you ready for some football?” every Monday night in autumn, consistently I am now asked by plan sponsors, “Are we ready for a group annuity purchase?” (It doesn’t have quite the same ring to it.)
But group annuity purchases continue to soar to new heights of sales. A decade-plus of plan sponsors funding at historically low interest rate levels has resulted in the best funded levels in a generation now that interest rates have moved up significantly.
According to LIMRA.com, US pension risk transfer sales in Q2 2023 were up 31% over the prior year. For the first six months of the year, the increase is 28% over prior period. This is remarkable because 2022 was already a record setting year with sales up 42% over 2021. The message from plan sponsors is clear. After a prolonged period where the risk factors were not favorable for DB sponsors, they are taking advantage of the best opportunity to lower their risk profile in quite some time.
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Information provided in this article is general in nature, is provided for informational purposes only, and should not be construed as investment advice. Performance data represents past performance. Past performance is not indicative of future results.
| Year to Date Investment Mix (Net) | ||||
|---|---|---|---|---|
| Plan Type | Growth | Balanced | LDI Lite | LDI |
| Frozen (for several years) | 7.0% | 5.6% | 4.3% | 2.2% |
| Recently Frozen | 7.5% | 6.0% | 4.7% | 2.6% |
| Ongoing Traditional | 8.0% | 6.6% | 5.2% | 3.1% |
| Cash Balance | 7.2% | 5.7% | 4.4% | 2.4% |
| Month-over-Month Investment Mix (Net) | ||||
| Plan Type | Growth | Balanced | LDI Lite | LDI |
| Frozen (for several years) | -0.6% | -0.6% | -0.8% | -0.8% |
| Recently Frozen | 0.0% | 0.1% | -0.1% | -0.2% |
| Ongoing Traditional | 0.8% | 0.8% | 0.6% | 0.6% |
| Cash Balance | -0.5% | -0.4% | -0.6% | -0.6% |
| 12-Month Change Investment Mix (Net) | ||||
| Plan Type | Growth | Balanced | LDI Lite | LDI |
| Frozen (for several years) | 11.5% | 9.2% | 7.0% | 3.6% |
| Recently Frozen | 13.7% | 11.5% | 9.2% | 5.7% |
| Ongoing Traditional |
16.3% | 14.0% | 11.6% | 8.1% |
| Cash Balance | 12.1% | 9.9% | 7.6% | 4.2% |
Please click on the "Historical" tab at the top of the website for longer time periods, including Five-Year and Return Since Inception (1/1/2016).
USI Consulting Group (USICG) has been delivering retirement consulting and administration services to organizations and their participants for over 40 years. We offer innovative solutions to mitigate risk, stay compliant and protect plan sponsors and fiduciaries with deep commitment to client satisfaction and delivering superior results.
Clearstead is an independent financial advisory firm serving wealthy families and leading institutions across the country. As a fiduciary, it provides wealth management services and investment consulting to enable clients to meet their financial objectives, achieve their aspirations, and build strong futures.