Largest annuity deal in Canadian history

Group annuity transaction valued at $530million is first of its kind in this country

Records are tumbling as Sun Life Assurance announced a $530million annuity transaction with two Canadian pension plan sponsors.

Not only is this the largest inflation-linked deal in the country’s history, but it is the first time that a combined group annuity transaction has been carried out in Canada.

The transaction, which was conducted at an institutional level, “should not have an impact on advisors or sellers” according to Sun Life media manager Gannon Loftus.

“It will provide significant cost savings to clients,” he said. “These savings came about by having both plan sponsors (who remain unknown to one other) transact at the same time. Sun Life worked with the two plan sponsors to find the most suitable de-risking solution.”

With many defined benefit pension plans providing pensions that are designed to increase with inflation, Sun Life attempted to create a solution that would offer inflation-linked annuities that would still be affordable.

The result was the combining of annuity purchases for two plans with the pricing conditional for both occurring simultaneously. This led to cost savings for the clients because the inflation risk was pooled to create a more efficient asset strategy.

Brent Simmons, senior managing director for Sun Life Financial, described the deal as “transforming the annuity market”.

“This transaction is in response to market demand for affordable solutions for inflation-linked plans,” he said. “Plan sponsors are looking for creative ways to de-risk and this is just one example of how we can help them meet their objectives and focus on their core business.”

There appears to be increased demand for de-risking solutions throughout the Canadian market: 2015 was the largest pension risk transfer market on record, three times higher than that of 2014.