Pension risk transfer premiums fell in November due to decreases in both discount rates and annuity purchase rates, a Milliman study said.
The estimated buyout cost as a percentage of accounting liabilities (accumulated benefit obligation) dropped to 101.8% as of Nov. 30, from 102.9% a month earlier.
The change was the result of average annuity purchase rates decreasing by 9 basis points, according to Milliman's latest pension buyout index study. Average accounting discount rates dropped 20 basis points in November.
Average annuity purchase rates among the most competitive rates, meanwhile, fell by 11 basis points. The index for competitive pricing dropped to 99.4% from 100.3% the previous month.
"November's record-low competitive buyout pricing rate, at 99.4%, reflects what we've been seeing for some plans in the market," said Mary Leong, Milliman consulting actuary and the study's co-author, in a news release. " While the buyout market softened in 2020 as a result of the COVID-19 pandemic, low competitive rates may spur activity as we close out the year and move into 2021."
The Milliman Pension Buyout index uses the FTSE Above Median AA Curve and insurers' composite interest rates to estimate the average cost of PRT transactions.