Defined benefit

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.

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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.

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Unparalleled experience

Aware Super’s partner for de-risking

Challenger was selected to provide a group lifetime pension policy to the value of $619 million that will de-risk the fund’s lifetime pension liabilities from investment, inflation and longevity risk.

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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

Challenger Life

Trustee of Challenger Retirement Fund

Employer

On-risk

On-risk (limited)

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.

Table of Contents

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.

Key features

Benefits of de-risking with Challenger

Risk transfer

Reduction to top up risk

Strength of insurer

Attractive pricing

Ongoing maintenance fee reduction

Ability to evolve group policy

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Our comprehensive solutions

Challenger de-risking capabilities

Glide path investing

Longevity swap

Buy-in

Buy-out

Buy-out via SFT

Loading component...

Unparalleled experience

Aware Super’s partner for de-risking

Loading component...

Insights

Defined Benefit de-risking

Giving members the best outcomes

An introduction to alternatives investing

Loading component...

Loading component...

Risk transfer

Reduction to top up risk

Strength of insurer

Attractive pricing

Ongoing maintenance fee reduction

Ability to evolve group policy

Glide path investing

Longevity swap

Buy-in

Buy-out

Buy-out via SFT

Aware Super’s partner for de-risking

Defined Benefit de-risking

Giving members the best outcomes

An introduction to alternatives investing