Pension risk transfer premiums drop a bit in April – Milliman

Pension risk transfer premiums fell slightly in April, a Milliman study said.

The estimated buyout cost as a percentage of accounting liabilities (accumulated benefit obligation) was 102.4% as of April 30, down from 102.7% at the end of March.

The cost has fluctuated between 101.8% and 102.7% since the beginning of 2021.

"The last several months have seen steady fluctuations in retiree buyout costs, without huge swings," said Mary Leong, Milliman consulting actuary and the study's co-author, in a news release. "This is good news for plan sponsors that have been monitoring the index and have moved forward with a retiree buyout de-risking strategy. We'll see if the trend holds as we move into summer."

Also, average annuity purchase rates among the most competitive rates increased by 4 basis points. The index for competitive pricing rose to 100.1% from 99.7% the previous month.

Average accounting discount rates dropped by 14 basis points during April, and annuity purchase rates decreased by 10 basis points on average and 18 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.