Pension risk transfer premiums fell in September due to increases 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) fell to 102.3% as of Sept. 30 from 102.9% a month earlier.
The change was the result of average accounting discount rates going up 2 basis points during September, while average annuity purchase rates increased 9 basis points, according to Milliman's latest pension buyout index study.
"September's low competitive buyout rate indicates that some plans may have been able to transfer pension risk at a cost that is only a fraction higher than the plan's accounting liability," said Mary Leong, Milliman consulting actuary and the study's co-author, in a news release. "Similarly, September's average buyout rate, at 102.3%, is the lowest we've seen since launching Milliman's Pension Buyout index."
The index for September also included for the first time an analysis of average annuity purchase rates among only the most competitive rates. That average rate increased 11 basis points in September, 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 PRT transactions.
