Posted on 03 May 2012
By Mark Miller
Ford Motor Company is making an offer it hopes 90,000 former employees can’t refuse: a lump sum buyout of their pensions.
The auto giant plans to offer a voluntary buyout of defined benefit pensions to salaried retirees and former employees, with payouts to start later this year.
Although Ford hasn’t revealed the exact terms of the payments, the scale of the offer is unprecedented for a corporation that isn’t actually terminating a pension plan. Ford hopes the strategy will reduce its pension liabilities and balance sheet volatility. If successful, Ford could be starting a trend that other companies follow.
Is a lump sum offer a good deal for Ford’s pension beneficiaries? How about workers at other companies, many of whom are offered lump sum options at retirement in lieu of a lifetime income stream from a pension?
I posed the question to one of the top experts in North America on pensions, retirement and annuities – Moshe A. Milevsky. He’s 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 this week.
Read his answers in my column today at Reuters Money.