Mercer Pension Risk Exchange™ 

A Ground Breaking Approach to Pension Risk Management

Many defined benefit plans are now closed to new employees, but these plans still represent significant obligations for the company to manage alongside its on-going business. In addition to the company specific situation, economic factors are also driving up the demand for annuity transactions; however, the annuity marketplace can be hampered by long execution timelines and lack of price transparency. A plan sponsor requires robust information on the financial position of the company’s pension plan, needs an understanding for how key financial metrics are developing over time, and values customized pricing information. This information must be accurate, up-to-date, and easily accessible.

Current Bulk Annuity Market Challenges

    Mercer Pension Risk Exchange™

    • READINESSS
      Mercer’s systematic and disciplined approach finalizes all data and documents well in advance of the transaction, enabling swift execution. We advise on target price levels and plan metrics that should be monitored, and we establish triggers upon which to act.
    • DYNAMIC MONITORING
      Our pricing platform allows insurers to submit regular bids for specific plans. This enables sponsors to continuously monitor their unique price and specific plan metrics and to execute when market conditions are optimal.
    • EXECUTION SUPPORT
      Provides fiduciary training and insurer due diligence to support the final auction, insurer selection, and transition of responsibilities to the insurer, all while enhancing participant security.

    Mercer Pension Risk Exchange Process

    Mercer Pension Risk Exchange ™ supports you through each step of the annuity placement process

    There are four components of the process. We work with clients to understand the services that are most applicable to their current situation, and timeline to execute a transaction. Our approach provides increasing financial certainty as a client moves through the purchase process.

    Explore: Understand market appetite and competitiveness; Assess trends over time; Determine timing/strategy to proceed with a transaction

    Discover: Prepare insurer RFP and plan data; Gather preliminary annuity quotes from insurers; Establish financial metrics to monitor; Start fiduciary education

    Monitor: Monitor annuity pricing against financial metrics; Complete fiduciary education; and insurer due diligence

    Execute: Hold final placement auction; Select insurer and transfer premium; Commence post deal transition

    Timeline

    Mercer Pension Risk Exchange reduces the time to transact by bringing forward:

    1. Data preparation
    2. Agreement of optimal financial targets
    3. Approvals and sign-off
    TRADITIONAL APPROACH MERCER PENSION RISK EXCHANGE APPROACH

    Plan sponsor agrees to annuity buyout, but unclear of “right price” 

    Data clean up exercise

    Insurer RFP and data shared with insurers

    Initial prices received: unclear if “right price” so process stalls

    Price updates received, client becomes comfortable with pricing

    Final placement held

    Deal executed

    Plan sponsor agrees to assess annuity pricing and proceed if financial targets met

    RFP and data shared with insurers on the Exchange

    Price updates received, financial metrics updated

    Initial prices received

    Financial triggers hit

    Pricing Opportunity Missed by Traditional Approach

    Final placement held

    Deal executed

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