Posted on 01 June 2012
By Mark Miller
News today that General Motors Co. will jettison nearly 25 percent of its U.S. pension obligation comes on the heels of a similar move by Ford Motor Co.
GM plans to reduce its defined benefit pension obligations to white collar workers through a combination of lump-sum buyouts and by transferring management of other pensions to a division of Prudential Financial Inc., which will administer a group annuity.
Are lump sum buyouts a good deal for workers? While it’s a complex, highly individual choice, the retiree’s bias usually should be in favor of the lump sum, because it involves a huge transfer of risk from employer to employee.
When Ford announced its lump sum offer, I interviewed one of North America’s top experts on pensions, retirement and annuities – Moshe A. Milevsky.
Milevsky is a finance professor at the Schulich School of Business at York University in Toronto and CEO of QWeMA Group, which licenses intellectual property and algorithms used in retirement calculators. His latest book, The Seven Most Important Equations for Your Retirement and the Stories Behind Them (John Wiley & Sons), was published last month.