In Partnership with

Retirement realities: Canadians want a solution to the pension puzzle

How Sun Life’s target age solution balances the need for reliable and lasting income with the desire for flexibility

Michael Carter, MBA

Sun Life

Industry experts

Anne Meloche, FSA, FCIA

Sun Life Global Investments

Phil Trem

MarshBerry

Trevor Baldwin

Baldwin Risk Partners

Michael Carter joined Sun Life in 2012, with progressive roles focused on developing and delivering digital and financial products and solutions across Canada. As AVP, sponsor experience and product development, he is accountable for product development within Sun Life Group Retirement Services (GRS), including employer plans, sponsored plans, and decumulation solutions. He is also responsible for the service experience delivered to GRS’s employer clients. Carter leads seven teams dedicated to developing, enhancing, and maintaining innovative financial solutions for group-sponsored plans focused on strengthening Canadians’ financial wellness and resiliency. He is focused on establishing a suite of products and solutions for clients with automated-savings capabilities, integrated financial advice and planning, and a full suite of flexible solutions to achieve a wide range of goals.

Sun Life

Michael Carter, MBA

As head of institutional business for Sun Life Global Investments (SLGI), Anne oversees business development and growth. She leads the national institutional sales team, focusing on providing investment solutions for Canadian plan sponsors. Anne is part of SLGI's leadership team and actively involved in sustainability initiatives. With a background in consulting and actuarial science, she has extensive experience in DC plan management. Anne holds a bachelor of mathematics from Concordia University and is a fellow of the Society of Actuaries and Canadian Institute of Actuaries. She serves on the Benefits Canada Pension/Investments Board and the Quebec Breast Cancer Foundation Board, and is a frequent speaker at industry events.

Sun Life Global Investments

Anne Meloche, FSA, FCIA

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Tellus in penatibus condimentum malesuada ante vulputate nisi, arcu leo. Amet urna sapien purus vestibulum fermentum a. Cursus metus massa donec sed varius. Nunc enim sit morbi lacus, molestie et nunc. Nullam sed facilisi id malesuada. Ante purus velit, quam scelerisque ultrices scelerisque donec. Velit egestas vel ornare pellentesque ridiculus. Mauris tempor augue quis mattis suspendisse feugiat commodo posuere. Faucibus massa adipiscing nullam elit, ac vel accumsan. Phasellus eget ac dignissim fermentum ac placerat elit, metus. Nulla porttitor ante egestas molestie quis quam. Pharetra magna sit mauris tellus gravida rutrum libero sit. Justo orci cras euismod proin massa lorem ut. In non tellus phasellus faucibus ullamcorper nullam odio dui et.

MarshBerry

Phil Trem

Baldwin Risk Partners

Trevor Baldwin

Vault Plus Mortgage and Finance Consultancy

David Merison

“At a macro level, the fundamental forces that have driven consolidation across the insurance distribution landscape remain as prevalent today as ever”

Michael Carter, Sun Life

CANADIANS HAVE become better at saving for retirement, but when it comes to turning that savings into reliable income, there is no clear or one-size-fits-all solution. With rising concerns about how long their savings will last and whether they’re truly prepared for life after work, there is a lot of focus on how our industry can better support Canadians with retirement planning. The question remains: Why is it so hard to find clear, reliable solutions for retirement, and, more importantly, why aren’t existing solutions enough? Anne Meloche, head of institutional business at Sun Life Global Investments, and Michael Carter, assistant vice president of product development and sponsor experience for Sun Life Group Retirement Services, are tackling these concerns head-on. Carter gets straight to the point: “Retirement is potentially one of the trickiest financial problems that people need to solve because there are so many unknowns.” With the average Canadian’s financial literacy hovering around 50–60 percent, many are navigating these challenges without a full set of tools. With only one-third of Canadians feeling ready to retire and 50 percent afraid they won’t have enough income to maintain their lifestyle, the need for better solutions is clear.1 To address this, the spotlight is shifting toward innovative solutions within the capital accumulation plan (CAP) space, where workplace pensions and employer-sponsored plans form the backbone of many Canadians’ financial security in retirement. But how do these plans support Canadians, and what gaps remain?

“We’ve mentioned flexibility a few times because it’s key. This solution provides the freedom to adapt to life events – whether physical or mental health conditions – and makes sure members can exit or adjust when necessary”

Anne Meloche, Sun Life GLOBAL INVESTMENTS

The pressing question: Why haven’t we solved the retirement income challenge? Carter argues that it comes down to the industry’s focus on longevity risks, often through products like annuities. While annuities are great at providing lifetime income, they come with limitations that many Canadians aren't willing to accept. “Canadians have worked hard to grow their savings, and they’re not interested in giving up control of that money,” Carter explains. “They want flexibility, control, and the ability to leave something behind for their loved ones.”

Recognizing a gap in the current array of retirement income solutions, Sun Life sought to deliver a solution that offers the reliable income and simplicity that Canadians want but without locking savings into an annuity. Meloche and Carter have introduced what they call the “target age solution.” Inspired by the success of target date funds, which automatically adjust the level of investment risk as someone nears retirement, this solution applies the same concept to income generation during retirement. “Target date funds have served plan members well in saving for retirement, so we designed the parallel concept of a target age solution,” Meloche explains. “Target date funds were created to automate and simplify investment decisions during the savings

The investment engine behind the target age solution is built specifically for retirement, balancing adequate returns with the need to minimize risk and volatility. Meloche outlines the strategic allocation: “41.5 percent in equities, 58.5 percent in fixed income, with about a quarter in alternatives. On the fixed-income side, we have private fixed income and commercial mortgages. For equities, we have liquid alternatives like REITs and listed infrastructure, and we’re adding trend-following strategies and real assets like infrastructure and real estate.” Meloche adds, “We want to make sure the money lasts while also maintaining living standards. If we only focus on minimizing fluctuation, we lose out on the returns needed for longevity.” The portfolio is designed to strike the right balance, monitored annually, and reoptimized as needed to ensure it remains efficient. Although they’re starting with one investment engine, Sun Life is prepared to offer more options based on client feedback. Currently, they offer a moderate portfolio but plan to provide both conservative and aggressive versions if demand grows. “We’ll see how things develop. 85 percent of target date fund assets currently sit in moderate versions, so simplicity might be the best approach for now,” Meloche notes. A critical question raised during the development of the target age solution is why the first maturity date starts at 85 when Statistics Canada reports average life expectancy at 83. Meloche explains, “We based our maturity ages on the life expectancy of working Canadians at age 65. Median life expectancy is 85 for men and 88 for women, without mortality improvement. With those improvements it rises to 88 and 90 respectively, and by 95, there’s still a 25 percent chance of survival. 100 is more for outliers, with around 5 percent of people living that long.” This focus on realistic life expectancy data ensures that the solution is practical but also adaptable. “We’ve mentioned flexibility a few times because it’s key. This solution provides the freedom to adapt to life events – whether physical or mental health conditions – and makes sure members can exit or adjust when necessary,” Meloche stresses.

phase. Similarly, the target age solution automates and simplifies retirement income decisions.” In this solution, retirees need to make only one key decision: their “maturity age” – the age they want their retirement savings to last. The plan then takes care of everything from there, adjusting the withdrawal amounts, accounting for regulatory minimums and maximums, and managing the withdrawals and investments to ensure the money lasts. As Carter highlights, “62 percent of Sun Life’s plan members are already invested in target date funds, so offering something similar for the decumulation phase makes sense.” The target age solution works across different types of accounts – RIFs, LIFs, TFSAs, and non-registered accounts – optimizing the depletion of assets over the predetermined period. Meloche outlines how it functions: “We set the initial payment by looking at the length of the predetermined period, from 65 to 85, 90, etc., and use long-term return assumptions of the underlying portfolio to calculate payments.” Every January, to ensure the money will last, the payment is refreshed based on the actual performance of the fund and any additional withdrawals or contributions. Meloche highlights that if life expectancy is underestimated, members can switch to a longer maturity age. Conversely, for those facing shortened life expectancy, the plan can be adjusted immediately, providing a lower maturity age and recalculated payments.

Expanding on this, Carter adds, “Obviously, one of the biggest unknowns is the length of your life and how to manage that against a finite resource like your financials. When we really listen to Canadians and what they’re struggling with, a couple of things come to the forefront.” While the CAP space offers helpful supports put into place in defined-contribution (DC) plans like auto-enrollment, auto-contributions, and default solutions (primarily target date funds), these safety nets are often missing when it comes to decumulation – leaving retirees to manage it on their own. According to Meloche, the issue lies in engagement: “Despite all the education and support we provide, many members don’t have a formal financial plan.” The problem isn’t just about having access to the right tools – it’s about using them. Avoidance, as Meloche points out, is a common response to the stress and complexity of retirement planning. “People don’t take advantage of the advice available, and that leaves them vulnerable when they retire,” Meloche emphasizes. “That is why we are focused on providing plan members with support to build financial roadmaps for retirement planning.” Carter adds, “We’ve seen increased engagement since we launched our digital tool, Sun Life One Plan, that allows members to integrate all of their savings and provides strategies to optimize outcomes for retirement savings.”

The desire for control and flexibility is why, despite the advantages, fewer than 10 percent of Canadians use annuities.2 While annuities provide many features Canadians desire, most people are reluctant to give up a large chunk of their retirement savings in exchange for a product that locks them in without the ability to change their minds later. This is what Carter refers to as the “annuity puzzle.” “We need a solution for the 90 percent of Canadians who aren’t leveraging annuities at all,” Carter notes. For those relying on drawdown accounts, there’s more flexibility but less support. With no professional guidance and the potential for market downturns just as retirees begin drawing down their savings, the risks are significant. Carter further highlights another overlooked issue: cognitive decline. “You might be able to go it alone when you’re 65 or 70, but as you start to reach 80 and 85, cognitive capabilities decline, unfortunately. A recent study found that 18 percent of Canadians 60 and older are entering retirement with a mild form of cognitive decline.”3 This adds another layer of risk for those relying solely on drawdown accounts without professional oversight. The real challenge, however, lies in managing longevity risk. “We’re starting to implement guardrails through retirement, especially with innovations like the target age solution,” says Carter. “But the challenge remains: How do you manage the trade-offs around longevity protection in the DC space?”

Read on

At its core, the target age solution acknowledges that retirement is not a static period. Retirees may spend more in their earlier years and save for healthcare costs in their later years. Having flexibility, control, and guidance is crucial. “The target age solution provides a foundation of reliable income but also gives retirees the freedom to access their funds when necessary,” Meloche explains. Sun Life is not content with just offering a new retirement solution – they’re determined to reshape the way the entire industry approaches retirement planning. Meloche is clear about their ambitious vision: “We’re going to be bold. We hope this will become a universal solution for the non-guaranteed portion of the decumulation portfolio. The whole industry needs to work together to solve this.”

At Sun Life, our purpose is helping Canadians achieve lifetime financial security and live healthier lives. We’re committed to helping our Clients and their employees successfully navigate life's most important moments. We’re also driven to look to the future and stay on the forefront of product development. As part of the Sun Life group of companies, Sun Life Global Investments was purpose built to combine the strength of Sun Life with some of the best asset managers in the world. We are driven by our goal to help plan sponsors deliver the best possible retirement for their members. And our unique advantages help us continually enhance our funds and develop new and innovative solutions to achieve this goal – to and through retirement.

Find out more

“At a macro level, the fundamental forces that have driven consolidation across the insurance distribution landscape remain as prevalent today as ever”

Trevor Baldwin, Baldwin Risk Partners

“Sellers no longer view a robust technology offering as a nice-tohave item; if a buyer isn’t bringing technology enhancements as a value proposition to the table, they are going to lose out on more transactions than they win”

Timothy J. Hall, Relation Insurance

In Partnership with

M&A Insights 2021

Insurance Business America uncovers the answers to brokers’ biggest questions about mergers and acquisitions, with expert insight from MarshBerry, Baldwin Risk Partners and Relation Insurance

Read on

Trevor Baldwin

Baldwin Risk Partners

Phil Trem

MarshBerry

Timothy J. Hall

Relation Insurance

Gerard Vecchio

MarshBerry

Industry experts

RESILIENT. It’s a term often used to describe the insurance distribution market, which continues to attract the hungry eyes of the investment community. Despite the COVID-19 pandemic and its socioeconomic challenges, the insurance distribution sector has remained resilient. As such, it’s no surprise that merger and acquisition activity in insurance distribution soared to record heights in 2020. Deal activity got off to a roaring start last year. Buzzing with energy after a record year of transactions in 2019, well-capitalized acquirers (both private-equity-backed and public companies) continued to build on that momentum and snap up insurance distribution firms. Many of the deals completed in January and February were negotiated and agreed to back in 2019, before the coronavirus pandemic brought the world to a halt.

attractive from an investment perspective. According to MarshBerry, the US saw a record deal count of 705 announced transactions in 2020, up from 648 in 2019. In addition, 57 firms made two or more acquisitions in 2020, compared to 49 in 2019. However, the total number of firms making acquisitions was higher in 2019 (202 versus 169 in 2020). What does all of this mean? According to Phil Trem, president of MarshBerry’s Financial Advisory division, “it likely shows fewer independent firms are buying due to continuing COVID-19 concerns. Those that were in acquisition mode leaned into the accommodating conditions of the marketplace. Fewer firms tried their hand at acquiring, while established buyers took full advantage of a hyperactive market.”

“Many buyers returned to the market over the course of 2020,” says Trevor Baldwin, CEO of Baldwin Risk Partners, “and we even saw new entrants as agency performance again proved resilient amid times of economic stress, reiterating the quality and durability of the industry as a whole.” Indeed, the factors driving consolidation in the insurance distribution landscape remained as prevalent in the COVID-19 era as before. For sellers, core motives included a quest for scale and additional resources (especially technology), lack of internal perpetuation, and a desire to capitalize on record-high valuations. Buyers, on the other hand, are interested in agencies and brokerages for their resilience, which has been proven through tough economic times like the Great Recession and the current pandemic. Insurance distributors have been able to produce predictable and consistent revenue streams coupled with high margins, making them

It’s unclear how long this valuation trend will last, given the potential for capital gains tax hikes under the Biden administration, but at the onset of 2021, deal activity in the US has kept pace with the frenzied finish of 2020. “While there remains uncertainty on when COVID-19 will ‘end,’ I believe that the insurance agency acquisition ecosystem has adapted to efficiently and effectively complete transactions in an alternative environment,” says Timothy Hall, EVP and head of mergers and acquisitions at Relation Insurance. “As indicated by the record number of transactions, deals still got done in 2020, and trends point to that continuing in 2021.” One thing is certain: Investment interest in the insurance distribution market remains high, even in these unprecedented times. With that in mind, IBA spoke to several M&A experts about key themes that are likely to dominate insurance mergers and acquisitions in 2021, from economic conditions and digitization to succession planning and the role of private equity. IBA hopes their insights will provide readers with an enhanced understanding of the current state of the insurance distribution M&A market in the US.

What's the macro overview of US insurance industry M&A trends in 2020?

Gerard Vecchio: In 2020, specialty markets completed 123 unique transactions, equal to 17.5% of total announced transactions for the year. Historically, specialty lines have typically comprised 13% to 15% of total annual announced deals. MarshBerry believes that two factors driving the increased number of M&A transactions involving specialty wholesalers, MGAs and program administrators could be 1) an accelerating insurance rate environment prevalent among many property & casualty lines of business, and 2) the low cost of debt capital. The acceleration of rate increases across a broad number of insurance coverages could situate sellers to be in a better position to meet or exceed future sale price incentives that may be tied to revenue or earnings growth, commonly known as earn-outs. There has been an acceleration of insurance rate increases across the business interruption, general liability, commercial auto, umbrella, commercial property and

professional liability/directors & officers liability lines of business. Furthermore, with the historically low cost of debt capital – one could argue that the real cost of debt capital is close to zero – buyers may be incentivized to pay premium valuations due to their ability to finance acquisitions at near zero borrowing costs. Trevor Baldwin: At a macro level, the fundamental forces that have driven consolidation across the insurance distribution landscape remain as prevalent today as ever. Scale increasingly matters, tech enablement – and the ability to invest in tech capabilities – is increasingly enhancing the value brokers can deliver for their clients, and robust valuations have made it increasingly difficult for principals to economically perpetuate ownership internally.

Relation Insurance Services, formerly Ascension Insurance, is a specialty insurance brokerage that offers superior risk-management and benefits-consulting services through our family of brands across the United States. More importantly, we’re a team of experienced professionals who genuinely care. Whether it’s for you, your family, or your business/organization, we want to be the relationship you trust for answers to your questions, solutions for your insurance needs, and peace of mind for your future.

Mashberry

Gerard Vecchio

Relation Insurance

Timothy J. Hall

Mashberry

Phil Trem

Baldwin Risk Partner

Trevor Baldwin

“At a macro level, the fundamental forces that have driven consolidation across the insurance distribution landscape remain as prevalent today as ever”

Trevor Baldwin, Baldwin Risk Partners

Timothy J. Hall, Relation Insurance

In Partnership with

M&A Insights 2021

Insurance Business America uncovers the answers to brokers’ biggest questions about mergers and acquisitions, with expert insight from MarshBerry, Baldwin Risk Partners and Relation Insurance

Read on

Timothy J. Hall

Relation Insurance

Gerard Vecchio

MarshBerry

Industry experts

Deal valuations also reached all-time highs in 2020, exceeding the records set at the end of 2019. “In the fourth quarter of 2020, valuations on top-rated platforms were approximately 10% higher than in the first quarter,” Trem says. “So, valuations realized during the pandemic, on average, were higher than they were pre-pandemic, which is not a trend we expected. Because of the resiliency of the insurance industry ... existing buyers renewed their acquisition appetite, while new entrants, impressed with this resiliency, added to an imbalance of buyer appetite. With more buyers in the space and heightened demand, valuations were inevitably driven higher.”

What's the macro overview of US insurance industry M&A trends in 2020?

Additionally, the onset of COVID-19 in early 2020 and the uncertainty that came with it, coupled with the threat of increasing capital gains tax rates under a new presidential administration, brought a wave of incremental private sellers to the table. While we saw a brief pause in activity from some of the more active acquirers in early 2020 due to the COVID-19 pandemic, activity picked up through the end of the year from both strategic and private equity players. With the presidential election uncertainty behind us, we expect a continued focus on potential tax increases and availability of attractive debt financing to drive robust M&A activity and sustained valuations through 2021.

are selling do so for a variety of reasons, including a desire to crystallize their investment – and likely single largest asset – at current market valuations, a lack of internal perpetuation and a recognized need for additional scale and resources.

Baldwin Risk Partners

Trevor Baldwin

Mashberry

Phil Trem

Relation Insurance

Timothy J. Hall

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Tellus in penatibus condimentum malesuada ante vulputate nisi, arcu leo. Amet urna sapien purus vestibulum fermentum a. Cursus metus massa donec sed varius. Nunc enim sit morbi lacus, molestie et nunc. Nullam sed facilisi id malesuada. Ante purus velit, quam scelerisque ultrices scelerisque donec. Velit egestas vel ornare pellentesque ridiculus. Mauris tempor augue quis mattis suspendisse feugiat commodo posuere. Faucibus massa adipiscing nullam elit, ac vel accumsan. Phasellus eget ac dignissim fermentum ac placerat elit, metus. Nulla porttitor ante egestas molestie quis quam. Pharetra magna sit mauris tellus gravida rutrum libero sit. Justo or24ci cras euismod proin massa lorem ut. In non tellus phasellus faucibus ullamcorper nullam odio dui et.

Mashberry

Gerard Vecchio

No silver bullet, but aiming close

Published November 11, 2024

The knowledge gap: more than just a lack of education

A target age solution: filling a gap in the spectrum

Flexibility and investment engine for the future

40–43% of retirees are worried about outliving their savings

Only 1/3 of respondents say they feel excited about their retirement and what’s to come

72% want a predictable income stream throughout retirement

57% want to be able to withdraw their money as needed

43% are unsure how much to withdraw in retirement

Retirement surveys

Carter adds, “Anything worth doing is worth doing big. We believe this can turn a traditionally negative conversation about running out of money in retirement into a positive one.” With their target age solution, Sun Life is taking a significant step toward addressing the complex realities of retirement in Canada. It’s not about reinventing the wheel – it’s about offering practical, flexible solutions that meet people where they are. The result? A retirement where Canadians can focus on living, not just surviving.

Sources: Survey by Sun Life and Canadian Association of Retired Persons, 2024; 2023 MFS Global Retirement Survey, Canadian results

About

Directories

Resources

Investments

Pensions

benefits

News

RSS

Sitemap

Privacy

About us

External contributors

Authors

Terms & Conditions

People

Companies

A practical and realistic solution

Sources: 1 2023 MFS Global Retirement Survey, Canadian Results 2 Sun Life and Canadian Association of Retired Persons 2024 survey 3 https://www.alz.org/alzheimers-dementia/what-is-dementia/related_conditions/mild-cognitive-impairment

Disclaimer: Designed by Sun Life Global Investments in partnership with Sun Life Group Retirement Services for plan members in retirement. This solution is available exclusively through Sun Life Group Retirement Services. Sun Life Global Investments is a trade name of SLGI Asset Management Inc., Sun Life Assurance Company of Canada, and Sun Life Financial Trust Inc. all of which are members of the Sun Life group of companies. Group Retirement Services are provided by Sun Life Assurance Company of Canada, a member of the Sun Life group of companies. © SLGI Asset Management Inc. and its licensors, 2024. SLGI Asset Management Inc. is a member of the Sun Life group of companies. All rights reserved.

A target age solution: filling a gap in the spectrum

About

Directories

Resources

Investments

Pensions

Benefits

News

RSS

Sitemap

Privacy

About us

External contributors

Authors

Terms & Conditions

People

Companies

About

Directories

Resources

Investments

Pensions

Benefits

News

RSS

Sitemap

Privacy

About us

External contributors

Authors

Terms & Conditions

People

Companies