Estimated average pension risk transfer premiums rose slightly in February but the average rates among the most competitive bidding processes fell a full percentage point, a study by Milliman showed.
The estimated buyout cost as a percentage of accounting liabilities, or accumulated benefit obligations, was 103.7% as of Feb. 28, up from 103.5% as of Jan. 31, according to a report of the Milliman Pension Buyout index.
However, the average of the most competitive annuity purchase rates fell by 100 basis points to 98.9% from 99.9% a month earlier.
"For plan sponsors participating in a competitive bidding process, the retiree buyout cost is at the lowest we've seen since Milliman began publishing this data in October 2020," said Mary Leong, a consulting actuary with Milliman and co-author of the study, in a news release Thursday. The 4.8 percentage-point spread "between competitive and average buyout costs shows the impact a competitive bidding process can have," she said.
Average accounting discount rates during the month of February increased by 23 basis points from the previous month, while annuity purchase rates increased by 35 basis points for the most competitive rates, according to the study.
The Milliman Pension Buyout index uses the FTSE Above Median AA Curve and insurers' composite interest rates to estimate the average cost of pension risk transfer transactions.
