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De-risking Options

Brookfield Annuity offers companies and DB pension plans of varying sizes a range of options for managing and minimizing risk through group annuity buy-outs, group annuity buy-ins and longevity insurance. We’ll work with you to determine the best choice for your plan.

Group Annuity Buy-out

A group annuity buy-out allows DB plan sponsors to take the long-term risks and obligations associated with a specific group of pensioners and comprehensively transfer them to Brookfield Annuity.

Group annuity buy-out specifics: 
  • A single premium payment – the “buy-out” – covers the designated group permanently.
  • Brookfield Annuity then takes on the responsibility of providing full pension support and administration, which includes making guaranteed monthly payments to pensioners in the buy-out group.
  • A group annuity buy-out involves a wholesale transfer of risk and requires an accounting settlement. If a plan is underfunded, a top-up sponsor contribution will be needed to ensure that the portion of DB pension risk being covered is completely funded when the transfer is made.
  • A group annuity buy-in, which does not need any accounting settlement, can be a first step to a group annuity buy-out.

Buy-out Annuity

  • Pension plan pays single premium to insurer
  • Insurer makes guaranteed payments to pensioners
  • Insurer covers investment and longevity risk
  • Results in P&L charge for plan sponsor and additional cash funding if plan is underfunded

Group Annuity Buy-in

A group annuity buy-in is a solution that effectively transfers pension risk for a designated group of pensioners to Brookfield Annuity. It does not require either an accounting settlement or a contribution top-up. 

  • With a buy-in, the pension sponsor makes a single premium payment to Brookfield Annuity, which then makes guaranteed monthly payments back to the plan.
  • Brookfield Annuity assumes the responsibility and the risk for making investments and payments, but the pension plan continues to be administered by the plan sponsor.
  • While pension risk is transferred through the buy-in, it still remains on the plan sponsor’s balance sheet, where the policy with Brookfield Annuity shows as an investment, and the sponsor also continues to administer the plan.
  • A group annuity buy-in, which does not require an accounting settlement, can be a first step to a group annuity buy-out.

Buy-In Annuity

  • Pension plan pays single premium to insurer
  • Insurer makes guaranteed payments to the pension plan
  • Pension plan continues to make monthly payments to retirees
  • Insurer covers investment and longevity risk
  • Does not trigger a P&L charge or require additional cash funding
  • Convertible to a buy-out at any time

Longevity Insurance

Longevity insurance is an effective solution for managing the risk associated with increased longevity among a defined group of pension plan members.

People are living healthier and living longer. Since 1901, according to the Office of the Superintendent of Financial Institutions*, the average life expectancy of Canadians has increased by 33 years. That’s a wonderful thing, but it can have a significant impact on pension plans that were established with expectations about longevity that are no longer valid. Longevity insurance offers DB plan sponsors a practical approach to addressing longevity risk.

A plan sponsor makes fixed payments to Brookfield Annuity based on the expected lifespan of a designated group of pensioners. In return, we make variable payments to the pension plan based on the actual lifespan of pensioners within this group.

After purchasing longevity insurance, a pension plan retains the other risks associated with pension benefit payments.

*“Living to 100…will the Canada Pension Plan be sustainable?”, OSFI, October 2014