Milliman: Pension risk transfer premiums tick up in March

Pension risk transfer premiums inched up in March, according to a study by Milliman.

Per the report, the estimated buyout cost as a percentage of accounting liabilities (accumulated benefit obligation) was 102.7% as of March 31, up from 102.1% at the end of February.

Also, average annuity purchase rates among the most competitive rates rose by 40 basis points. The index for competitive pricing went up to 99.7% from 99.3% the previous month.

"As discount rates continued to climb upward in March, buyout rates lagged slightly behind the growth in accounting rates, resulting in an increase in the relative buyout cost," said Mary Leong, a consulting actuary at Milliman and co-author of the study, in a news release. "Despite the increase, competitive retiree buyout costs remain optimistic at just under 100% of the ABO, keeping derisking strategies attractive for plan sponsors looking to annuitize retiree populations."

Average accounting discount rates increased by 27 basis points during March, while annuity purchase rates increased by 20 basis points on average and 23 basis points for the most competitive rates, according to the report.

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.