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It took about a year of discussions and negotiations; it was incredibly innovative and thought as the first available in Canada.
But if this was throughout two Canadian pension funds – whose names have not been disclosed – paid Sun Life Assurance Company of Canada a combined one-time premium of $530 million and transferred so-called investment, longevity and inflation risk towards the insurance unit of Sun Life Financial Inc. Quite simply future funding of the promised benefits was offloaded to Sun Life.
At $530 million, Sun Life asserted the transaction produces the largest group annuity in Canadian history. In 2013, Sun Life says it completed an offer with the Canadian Wheat Board worth $150 million.
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Brent Simmons, senior md, defined benefit solutions at Sun Life Financial, said Tuesday after the deal was announced that as a whole the two pensions saved $20 million by coming to the table together rather than approaching Sun Life individually. “We were pleased to pass those savings on,” said Simmons, who noted the two pension funds had promised different but complimentary sets of benefits to their employees.
Simmons asserted one fund promised to increase benefits if inflation was low as the other had promised to increase them when inflation was high. Simmons added that the combined annuity purchase is appropriate for plans with indexing formulas that are related to inflation but are different enough to become complementary.
To make the numbers work, Sun Life combined the annuity purchases for the two plans, with the pricing conditional on both purchases occurring simultaneously.
Under the arrangement, Sun Life can make the instalments to the two pension plans, which in turn can make the promised payment towards the retirees.
