U.S. pension risk transfer premiums rose slightly in March as a result of rising discount rates, a study by actuarial and consulting firm Milliman showed.
The estimated average premium among the most competitive rates was 102.5% as of March 31, up from 101.7% a month earlier, according to the Milliman Pension Buyout index.
Milliman said the competitive rates rose because average accounting discount rates increased by 9 basis points, while competitive annuity purchase rates dropped 2 basis points in March. The calculation includes rounding error.
“Although interest rates ended the month close to where they started, there was a lot of movement in March largely due to tariff policy shifts and economic volatility,” said Jake Pringle, a principal and consulting actuary at Milliman and co-author of the study, in a news release April 29.
“Plan sponsors with PRT projects are keeping an eye on those interest rates as they ultimately determine the cost to buy annuities for their participants.”
In addition, the average annuity purchase cost across all insurers rose slightly to 104.7% as of March 31, up from 104.3% as of Feb. 28.
The Milliman Pension Buyout index uses the FTSE Above Median AA Curve and the composite interest rates of nine insurance companies that offer pension buyouts to estimate the average cost of pension risk transfer transactions.
