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Challenger Life has a long history in annuity and pension transactions, including Part 9 transfers of annuity books, reinsurance of annuity portfolios, buy-ins and successor fund transfers, aimed at helping reduce or remove longevity risk, investment risk and inflation risk.
An important addition to Challenger’s defined benefit de-risking service is the ability to work with defined benefit pension plans in the lead up to the pension de-risking phase by providing duration matching portfolio management services to help migrate the asset portfolio towards an exposure that moves in line with the pension liabilities, therefore providing a smooth runway to the liability de-risking phase.
We have over 30 years of experience in delivering guaranteed income streams, and we have developed a business that delivers market-leading longevity protection and lifetime income solutions to our clients. We have reliably paid all benefits as they have fallen due and will continue to do so into the future.
Key features
Benefits of de-risking with Challenger
Risk transfer
Longevity, inflation and sequencing risks associated with the defined pension liabilities are transferred to Challenger Life.
Reduction to top up risk
Material reduction in economic liability for risks non-core to the plan sponsor. Also decrease in need to top-up during periods of poor market performance.
Strength of insurer
Highly capitalised and APRA regulated life insurance company with "A" credit rating from S&P.
Attractive pricing
Challenger price lifetime solutions with an attractive spread over the long term swap rate, providing a premium over the risk free rate.
Ongoing maintenance fee reduction
Cost savings from reduction or removal of actuarial, administration and investment costs.
Ability to evolve group policy
Option to add new pensioners to a buy-in group policy as well as providing a price locked glide path to an SFT or buy-in.
Our comprehensive solutions
Challenger de-risking capabilities
Glide path investing | Longevity swap | Buy-in | Buy-out | Buy-out via SFT | |
|---|---|---|---|---|---|
| Detail | Fund incorporates a de-risking strategy to gradually reduce impact of market volatility on asset pool. | Fund pays an agreed schedule of payments to Insurer, in exchange for the actual payments for the covered retirees. | Trustee purchases a group policy from insurer to match or closely match the DB liabilities and retains responsibility for administering and reporting the existing account. | Insurer has full responsibility for meeting all pension liabilities, including investment and administration. | A Successor Fund Transfer (SFT) to Insurer's Retirement Fund, which takes over all ongoing liability to the member. |
| Member relationship | Super Fund | Super Fund | Super Fund | Challenger Life | Trustee of Challenger Retirement Fund |
| Employer | On-risk | On-risk (limited) | On-risk (limited) | Off-risk | Off-risk |
| Features | - Adopting a glide path can help the Fund sponsor avoid severe underfunding and contribution risk in poor markets. - One mechanism to help a fund reach its end-state de-risking goal. - Diversified investment solutions providing a close hedge for pension liability. | - If covered retirees live longer than expected, Insurer covers the difference. - Fund retains control of the ongoing investment. - Only longevity risk defeased. - Fund retains the direct liability for meeting the DB pension payments. | - Fund investment and longevity liabilities are insured. - Maintains existing legal and Asset Test Exempt (ATE) status and does not trigger any transfer balance cap reassessment. - Not a complete risk transfer- some residual risks may remain with Fund. - Pension administration costs and trustee responsibilities remain with Fund. | - All administration and reporting burdens removed. - Fund can be wound up with no residual liability. - Requires individual annuity purchases. - Potential loss of grandfathering (ATE and transfer balance cap assessment). - Member consent may be required. | - All existing pensioners transferred to Insurer's Retirement Fund, retaining grandfathering. - Fund can be wound up with no residual liability. - Cost incurred on a 'cost recovery' basis to undertake an SFT. - Time and higher complexity of transferring administration. - Higher execution risk. - Needs to meet equivalency on an overall basis. |
Unparalleled experience
Aware Super’s partner for de-risking
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Defined Benefit de-risking
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