Milliman analysis: Competitive pension risk transfer costs increase from 100.8% to 101.7% during September

SEATTLE--Milliman, Inc., a premier global consulting and actuarial firm, today announced the latest results of its Milliman Pension Buyout Index (MPBI). As the pension risk transfer (PRT) market continues to grow, it has become increasingly important to monitor the annuity market for plan sponsors that are considering transferring retiree pension obligations to an insurer.

“In September, we saw IBM announce a $6 billion PRT transaction, a good indication that the market will remain active as we enter the 4th quarter of another busy PRT year”

During September, the estimated cost to transfer retiree pension risk to an insurer in a competitive bidding process rose from 100.8% of a plan’s accounting liabilities (accumulated benefit obligation, or ABO) to 101.7% of those liabilities. That means the estimated retiree PRT cost is now 101.7% of a plan’s ABO. During the same time period, the average annuity purchase cost across all insurers in our index also increased, from 104.1% to 104.4%. The competitive bidding process is estimated to save plan sponsors about 2.7% of PRT costs as of September 30.

“In September, we saw IBM announce a $6 billion PRT transaction, a good indication that the market will remain active as we enter the 4th quarter of another busy PRT year,” said Jake Pringle, a Milliman principal and co-author of the MPBI.

The MPBI uses the FTSE Above Median AA Curve, along with annuity purchase composite interest rates from nine insurers, to estimate the competitive and average costs of a PRT annuity de-risking strategy. Individual plan annuity buyouts can vary based on plan size, complexity, and competitive landscape.

To view the complete Milliman Pension Buyout Index, go to https://www.milliman.com/mpbi. To receive regular updates with Milliman’s pension buyout analysis, contact us at [email protected].

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