U.S. pension risk transfer premiums rose slightly in December, a study by actuarial and consulting firm Milliman showed.
The estimated average premium among the most competitive rates was 101.4% as of Dec. 31, up from 101.2% a month earlier, according to the Milliman Pension Buyout index.
Milliman said the competitive rates rose because average accounting discount rates increased by 36 basis points, while competitive annuity purchase rates also increased 34 basis points in December.
Competitive rates ended 2024 just above the rates seen a year earlier, when the estimated average premium was 100.5%.
“Retiree buyout costs open 2025 with little change from where we ended 2024, as increases in annuity purchase rates matched the movement in accounting discount rates,” said Jake Pringle, a principal and consulting actuary at Milliman and co-author of the study, in a news release Jan. 22. “After a quiet fourth quarter, the pipeline for January and February PRT deals is very active. With a new year and a new entrant into the space, insurer capacity is at full strength, which is good news for plan sponsors looking to derisk through PRT.”
Also as of Dec. 31, the average annuity purchase cost across all insurers rose slightly to 104%, up from 103.9% as of Nov. 30.
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.