Pension risk transfer premiums rose in June due to a continued drop 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) increased to 104.6% as of June 30 from 103.9% a month earlier.
The change was the result of average accounting discount rates falling 11 basis points during June, compared to annuity purchase rates falling 18 basis points, according to Milliman's latest pension buyout index study.
"Since April, accounting discount rates have dropped approximately 30%," said Mary Leong, Milliman consulting actuary and the study's co-author, in a news release. "As insurers track the current fixed-income market, annuity purchase rates have followed this trend, resulting in a historically low interest rate environment for PRT transactions."
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.
