Pension risk transfer premiums rose in October 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) jumped to 102.9% as of Oct. 30 from 102.3% a month earlier.
The change was the result of average annuity purchase rates increased 6 basis points, according to Milliman's latest pension buyout index study. Average accounting discount rates went up 12 basis points in October.
Average annuity purchase rates among the most competitive rates, meanwhile, increased by 12 basis points. The index for competitive pricing increased to 100.3% from 100.2% the previous month.
"October's competitive buyout pricing trends continue to offer an attractive derisking strategy for some plans," said Mary Leong, Milliman consulting actuary and the study's co-author, in a news release. "Perhaps as a result, insurers have seen an uptick in pension risk transfer activity in the third/fourth quarters of 2020, as plan sponsors complete transactions prior to year-end."
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.
