Pension risk transfer premiums dropped slightly in April due to discount rates dropping compared with a decline in annuity purchase rates, said a study from Milliman.
Discount rates dropped 56 basis points during April, while annuity purchase rates went down 51 basis points, Milliman's latest pension buyout index study said.
The difference marks a slight decrease in the relative cost of annuities to 105.5% of a plan's liabilities as of April 30, compared with 105.7% of liabilities a month earlier.
"Interestingly, annuity purchase rates steadily decreased in January and February, increased 71 basis points during March and then dropped again by 51 basis points in April," said Mary Leong, a consulting actuary with Milliman and co-author of the study, in a news release. "Overall, the recent swing in rates has shown the volatility in interest rates as we continue to track annuity retiree buyout costs each month."
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.