The global consulting firm Mercer recently launched a pension buyout index.
Pension buyouts involve pension plan sponsors--typically employers--working with financial entities such as insurance or reinsurance companies to transfer or remove longevity risk from their plans. In other words, certain plan sponsors want to shift the risk of their plan participants living longer than expected to a financial entity that is interested and willing to assume this risk.
The Mercer index will provide pension plan sponsors with a monthly picture of the cost of purchasing a bulk annuity policy.
Bulk annuity policies are one method used to transfer longevity risk.
Source: Financial Times & Professional Pensions
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