'There's great pricing out there for plan sponsors who are able to transact,' says Sun Life's Brent Simmons
After a record-breaking year in 2024, the amount of pension risk transfers (PRT) among Canadian defined benefit (DB) plans is now facing an unexpected downturn. The main culprits behind the market’s sharp decline this year is a blend of economic uncertainty and business priorities, explains Sun Life’s Brent Simmons.
“Last year was a knockout year for the PRT market,” said Simmons, executive vice president and head of DB solutions at Sun Life Financial. “We had $11 billion, we had about 130 transactions, and a lot of excitement around the solutions that were being offered and how they could help employers.”
But that momentum didn’t carry into this year. As of mid-2025, PRT volumes have fallen 60 per cent year over year, far steeper than during the global financial crisis or the pandemic. Simmons emphasized just how rare this is.
“If we look back to the pandemic and the global financial crisis, we’re probably down 14 to 15 per cent year over year. So, 60 per cent is pretty unprecedented,” he said, noting that that the slowdown isn’t isolated to Canada, with US PRT volumes down approximately 50 per cent in the first quarter.
Despite strong funding levels and ongoing interest in risk transfer, a new wave of economic uncertainty, much of it tied to tariffs and geopolitical shifts, has stalled progress.
“All those ingredients are still there but the one new thing that’s been introduced is this extra dose of uncertainty,” added Simmons.
That uncertainty has diverted the focus of many plan sponsors, who are now preoccupied with safeguarding their core businesses rather than pursuing complex de-risking transactions. While Simmons emphasized that plan sponsors believe it’s a great solution, many just simply don’t have the time and attention to spend doing “a special and voluntary project”.
After all, pension risk management is ultimately a strategic choice, not an obligation, explained Simmons. Each plan sponsor sets their own risk tolerance and investment philosophy, and for some, continuing to operate the plan as it is remains a valid option.
Despite the slowdown in activity, Simmons believes there’s two major advantages currently working in favour of plan sponsors considering PRTs. With transaction volumes likely to come in well below the projected $10 to $11 billion, insurers now have more time and resources to dedicate to complex cases. That surplus capacity is translating into more personalized service for plan sponsors, especially those with non-standard or complicated annuity structures.
“There’s a lot of insurers with a lot of capacity that are more than happy to work with plan sponsors to create these pension risk transfer deals,” he said. “Insurers [are] willing to look at those more complicated provisions, maybe do illustrative pricing, spend more time educating plan sponsors.”
For sponsors with the bandwidth to move ahead, he believes this is a strong window of opportunity.
The second advantage is the favourable pricing environment. According to the June 30 annuity proxy, yields on annuities are now 21 basis points higher than those on passive corporate bond portfolios.
As an example, Simmons highlighted a plan sponsor who might hold a bunch of passive corporate bonds could trade up into the annuity, get a higher yield by 21 basis points, and get both the longevity risk and investment risk for free.
For CPI (consumer price index)-linked annuities, pricing has also improved, with costs coming down roughly 3% compared to last year. Simmons sees these shifts as creating a strong incentive for plan sponsors able to move quickly.
“We’re seeing this very favourable pricing find its way into the market,” noted Simmons. “There’s great pricing out there according to the proxy for plan sponsors who are able to transact,” he said.
Simmons encouraged plan sponsors to act now if they're considering a pension risk transfer, noting that the current market slowdown has created rare opportunities.
With fewer deals underway, there are open windows in insurers' transaction schedules, giving sponsors the chance to secure attention and favorable terms. Simmons noted that while these are complex transactions requiring planning, the timeline is manageable.
“Typically, what you would see would be two to three months of lead time,” he said, adding that leaves still lots of time for plan sponsors to bring transactions to market and take advantage of available capacity in the second half of the year.
“Now's a great time to take advantage of the market slowdown,” emphasized Simmons.
DB sponsors believe in the PRT market
Simmons underscored that many sponsors have come to recognize the risks embedded in traditional pension plan management: risks that can lead to unpleasant surprises, whether in cash contributions or earnings. A pension risk transfer, he argued, is one of the most effective ways to reduce that unpredictability.
While it is optional, Simmons believes the surge in PRT activity over recent years shows that many sponsors are making this decision proactively, motivated by a desire for stability rather than compelled by obligation.
Notably, Sun Life’s expectations for 2025 were built on a stable three-year run that saw the pension risk transfer market average around $8 billion annually, with 2024 surging to $11 billion. While another record year wasn't necessarily anticipated, the firm had forecasted steady activity in line with recent trends.
“We weren’t expecting necessarily an $11 billion market, but we were expecting that similar pattern of consolidation,” noted Simmons, highlighting a likely range between $9 and $11 billion.
Instead, the sharp drop in volumes caught them off guard. Looking back, Simmons acknowledged that growing trade uncertainty and the impact of tariffs have made the slowdown more understandable in context.
“We’re not having the market in 2025 that we thought we were going to have based on where 2024 ended,” he said.
