12 Oct Philips Makes Deal with Insurers to Handle Retirement Annuity Settlements
The U.S. subsidiary of one of the world’s biggest technology companies, Philips, agreed to a $900 million deal with two insurers last week. According to the industry news source International-Adviser.com, the U.K.-based Legal and General (LandG) and U.S.-based Prudential companies have inked an agreement to take over almost a billion dollars worth of annuity settlements.
Known as a pension risk transfer, the deal will see Philips transfer about $900 million owed in retirement obligations and annuity payments to 14,000 former employees. The two insurers will split the future annuity payments 50/50. Essentially, if you’re one of the employees in question, they’re selling your annuity settlement to an outside source so they don’t have to handle it.
Chief executive of LandG, Nigel Wilson, believes the agreement will open up the door to potential U.S. opportunities for them. This is the company’s first venture into the U.S. pension risk transfer market. He expressed this sentiment in a press release the company released to PRnewswire.com.
“We are very pleased to have signed an agreement with Philips for our first U.S. pension group annuity contract,” Wilson said. “The U.S. is a key market for Legal and General. We have a successful U.S. life assurance business, are rapidly growing our investment management business, and have now entered the U.S. pension risk transfer market. We are a leader in these markets in the UK, and plan to be a major participant in them in the U.S.”
Many corporate retirement accounts utilize annuity payments for their flexibility, convenience, and efficiency. They generally have several options, including payments over a designated time span, like 10 or 20 years, or for as long as the person happens to live.
On top of that it gives recipients the option of selling an annuity settlement to a third-party if you need to get settlement money now. Typically, withdrawals made from annuities before the age of 59.5 are subject to taxes and a 10% penalty. On the other hand, except in certain situations you have to start withdrawing by law once you reach the age of 70.5.
The agreement also contains a section concerning employees who had not yet retired by May 2015. It calls for the American United Life Insurance Company, a OneAmerica entity, to provide their future annuities bringing the grand monetary total of the deal to approximately $1.1 billion and covering 17,000 people.