Prudential Survey Finds Pension De-Risking is on Top of Financial Executives Minds

The rising costs of health care and the risks and costs associated with funding pension plans weigh heavily on corporate finances, according to the results of a recent survey by Prudential Financial in collaboration with CFO Research Services. Respondents to Prudential’s survey report that their companies continue to de-emphasize defined benefit (“DB”) plans in favor of defined contribution plans, and that finance executives are more actively considering their options for managing the remaining risk in their DB plans.

Liability-driven investing is increasingly being viewed as part of the glide path of pension de-risking, and pension risk transfer solutions also continue to garner attention, with nearly 4 in 10 respondents saying that they are at least “somewhat likely” to transfer DB plan risk to a third party within the next two years, according to the survey results. The report also noted that relatively few companies indicate they are waiting for additional options to become available before they consider transferring their DB plan risk.

The survey also found that more than 60 percent of executives believe employees enrolled in defined contribution plans will make better investment decisions if they are invested in an option that includes a guaranteed income feature, the report said. In addition, many of the executives said their companies are at least somewhat likely to offer guaranteed lifetime income products over the next two years.

“Balancing Costs, Risks, and Rewards: The Retirement and Employee Benefits Landscape in 2013”