More US buy-ins ahead?

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The pension plan buy-in has reached American shores at last. Prudential Retirement - part of US financial services giant Prudential Financial - has announced the first ever buy-in in the US, with a $75 million transaction for Hickory Springs Manufacturing Company, a North Carolina-based supplier to the furniture industry.

Insurers have been offering buy-ins to defined benefit plan sponsors for the last few years as a way for them to reduce risk, but it has taken until now for a client to sign up.

Most plan sponsors are fully aware that they carry significant amounts of interest rate, mortality and market risk in their pension plans, but in the majority of cases they have chosen to focus on addressing their deficits through their own investment activities, frequently by maintaining or even increasing the amount of risk.

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