Pension risk transfer premiums tick up in September – Milliman

U.S. pension risk transfer premiums among the most competitive bidding processes rose further in September to above 101%, a study by actuarial and consulting firm Milliman showed.

The estimated average premium among the most competitive rates was 101.1% as of Sept. 30, up from 100.5% as of Aug. 31, according to a report about the Milliman Pension Buyout index.

Also during September, the average annuity purchase cost across all insurers increased to 103.5% from 102.9% a month earlier.

"Although interest rates climbed during September, retiree buyout costs failed to keep pace, rising to their highest levels in 2023," said Jake Pringle, a principal and consulting actuary with Milliman and co-author of the study, in an Oct. 26 news release. "Despite the slight increase in costs, many plan sponsors have PRT on their agenda, so we should expect to see continued heavy volume to close out the year."

Average accounting discount rates increased by 43 basis points in September, and annuity purchase rates increased by 35 basis points for the most competitive rates, according to Milliman.

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.