The estimated cost to transfer retiree pension risk to an insurer in a competitive bidding process increased from 100.3 per cent of a plan’s accounting liabilities in March to 100.9 per cent in April, according to Milliman Inc.’s latest pension buyout index.
The index uses the FTSE above median AA curve and annuity purchase composite interest rates from nine insurers to estimate the competitive and average costs of an annuity de-risking strategy.
Read: Competitive pension risk transfer costs declined from 101.8% to 100.5% in December: report
During the same time period, the average annuity purchase cost across all insurers in the index increased from 102.6 per cent to 103.3 per cent. The report also estimated the competitive bidding process saved plan sponsors about 2.4 per cent of pension risk transfer costs as of April 30.
“Competitive buyout costs increased slightly in April to 100.9 per cent of [accounting liabilities], which is about average for the past 12 months,” said Jake Pringle, a principal at Milliman and co-author of the index. “With interest rates at their highest levels so far in 2024, plan sponsors with projects in the works could be optimistic about competitive pricing for their pension risk transfers.”
Read: Competitive pension risk transfer costs increase from 101.1% to 101.9% in October: report