Amid economic uncertainty, including volatile interest rates and persistent inflation, CFOs across industries are reevaluating how defined benefit (DB) pension plans serve their organizations and employees, according to Mercer’s June 10 report.
Over half of the 173 CFOs and senior finance executives surveyed said they plan to revise their DB plan designs in 2025. Many are exploring innovative structures, including hybrid models and cash balance plans, to better align with evolving workforce expectations.
While DB plan terminations have surged in recent years, 50% of CFOs confirmed they have no immediate plans to shut down their pension schemes. Mercer interprets this as a shift toward long-term strategic pension management, with most exits already completed.
“Many organizations are rethinking pension strategies, especially with half of employees lacking confidence in converting their savings into lifelong income,” said Scott Jarboe, U.S. defined benefit segment leader at Mercer.
Jarboe added that CFOs are not pulling back from pensions. Instead, there’s growing momentum behind adaptable plan designs that address diverse workforce needs without compromising organizational risk tolerance.
The survey also highlights increased adoption of dynamic de-risking strategies—up nearly 10% from last year—with 70% of CFOs implementing such approaches. Additionally, 44% have allocated more assets into fixed-income investments to enhance funding stability.
Risk transfer remains a critical focus. Over 70% of CFOs expect to offer lump-sum payments within the next two years, and more than 60% are considering or have already executed retiree obligation transfers to insurers through annuity purchases.
Reliance on external pension expertise is rising, with a noticeable uptick in organizations appointing fully outsourced chief investment officers. Notably, fewer than 40% of respondents expressed high confidence in their internal teams’ ability to manage the complexity of DB plans.
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Source: Hrdive.com
