Tag Archives: MPBI

Estimated cost of retiree pension risk transfer rises from 103.9% to 104.6% in June

Milliman today announced the latest results of its Milliman Pension Buyout Index (MPBI). As the Pension Risk Transfer (PRT) market continues to grow, it has become increasingly important to monitor the annuity market for plan sponsors that are considering transferring retiree pension obligations to an insurer. The MPBI uses the FTSE Above Median AA Curve, along with annuity purchase composite interest rates from insurers, to estimate the average cost of a PRT annuity de-risking strategy.

During June, the estimated cost to transfer retiree pension risk to an insurer rose 70 basis points, from 103.9% of a plan’s total liabilities to 104.6% of those liabilities. This means the estimated retiree PRT cost for the month is now 4.6% more than those plans’ retiree accumulated benefit obligation (ABO). Discount rates in June dropped 11 basis points compared to an 18 basis point drop for annuity purchase rates, resulting in an increase in the relative cost of annuities.

Since April, accounting discount rates have dropped approximately 30%. As insurers track the current fixed income market, annuity purchase rates have followed this trend, resulting in a historically low interest rate environment for PRT transactions.

Plan sponsors should note that the MPBI is an average cost estimate, and individual plan annuity buyouts can vary based on plan size, complexity, and competitive landscape. Furthermore, specific characteristics in plan design or participant population can affect the cost of a pension risk transfer.

To view the complete Milliman Pension Buyout Index, click here.  

Estimated cost of retiree pension risk transfer drops significantly, from 105.5% to 103.9% in May

Milliman today announced the latest results of its new Milliman Pension Buyout Index (MPBI). As the Pension Risk Transfer (PRT) market continues to grow, it has become increasingly important to monitor the annuity market for plan sponsors that are considering transferring retiree pension obligations to an insurer. The MPBI uses the FTSE Above Median AA Curve, along with annuity purchase composite interest rates from insurers, to estimate the average cost of a PRT annuity de-risking strategy.

During May, the estimated cost to transfer retiree pension risk to an insurer dropped significantly from 105.5% of a plan’s total liabilities to 103.9% of those liabilities. This means the estimated retiree PRT cost for the month is now 3.9% more than those plans’ retiree accumulated benefit obligation (ABO). Discount rates in May dropped 27 basis points compared to a 10 basis point drop for annuity purchase rates, resulting in the relative cost of annuities decreasing by almost two percentage points.

We’ve seen a continuous drop in rates in May. However, the drop in annuity rates isn’t as steep as the decline in discount rates. We may see an uptick in PRT deals for the month given the improvement in retiree buyout costs.

Plan sponsors should note that the MPBI is an average cost estimate, and individual plan annuity buyouts can vary based on plan size, complexity, and competitive landscape. Furthermore, specific characteristics in plan design or participant population can affect the cost of a pension risk transfer.

To view the complete Milliman Pension Buyout Index, click here.  

Estimated cost of retiree pension risk transfer rises from 105.2% to 105.7% in March

Milliman today announced the latest results of its new Milliman Pension Buyout Index (MPBI). As the Pension Risk Transfer (PRT) market continues to grow, it has become increasingly important to monitor the annuity market for plan sponsors that are considering transferring retiree pension obligations to an insurer. The MPBI uses the FTSE Above Median AA Curve, along with annuity purchase composite interest rates from insurers, to estimate the average cost of a PRT annuity de-risking strategy.

During March, the estimated cost to transfer retiree pension risk to an insurer rose slightly for the month, with costs ticking up from 105.2% of a plan’s total liabilities to 105.7% of those liabilities. This means the estimated retiree PRT cost for the month is now 5.7% more than those plans’ retiree accumulated benefit obligation (ABO). March’s increase is the result of discount rates increasing 80 basis points, compared to a rise of 71 basis points for annuity purchase rates, so that the relative cost of annuities climbed slightly.

March’s 80-basis-point jump in discount rates—a significant monthly increase—is likely the result of market volatility from the COVID-19 pandemic. However, insurer rates also increased to match the discount rate movement, so the end result is only a small increase in the buyout index.

Plan sponsors should note that the MPBI is an average cost estimate, and individual plan annuity buyouts can vary based on plan size, complexity, and competitive landscape. Furthermore, specific characteristics in plan design or participant population can affect the cost of a pension risk transfer.

To view the complete Milliman Pension Buyout Index, click here.

Estimated cost of retiree pension risk transfer climbs from 104.6% to 105.2% in February

Milliman today announced the latest results of its new Milliman Pension Buyout Index (MPBI). As the Pension Risk Transfer (PRT) market continues to grow, it has become increasingly important to monitor the annuity market for plan sponsors that are considering transferring retiree pension obligations to an insurer. The MPBI uses the FTSE Above Median AA Curve, along with annuity purchase composite interest rates from insurers, to estimate the average cost of a PRT annuity de-risking strategy.

During February, the estimated cost to transfer retiree pension risk to an insurer rose slightly for the month, with costs ticking up from 104.6% of a plan’s total liabilities to 105.2% of those liabilities. This means the estimated retiree PRT cost for the month is now 5.2% more than those plans’ retiree accumulated benefit obligation (ABO). February’s increase is the result of discount rates decreasing 19 basis points, compared to a 25 basis point drop for annuity purchase rates, so that the relative cost of annuities climbed slightly.

Plan sponsors considering de-risking strategies amidst the recent market volatility can use the Milliman Pension Buyout Index to better understand cost trends in the market, so as to approach any PRT decisions at the best possible time.

Plan sponsors should note that the MPBI is an average cost estimate, and individual plan annuity buyouts can vary based on plan size, complexity, and competitive landscape. Furthermore, specific characteristics in plan design or participant population can affect the cost of a pension risk transfer.

To view the complete Milliman Pension Buyout Index, click here.

Milliman launches monthly Pension Buyout Index to track the estimated cost of retiree pension risk transfer transactions

Milliman today announced the launch of the new Milliman Pension Buyout Index (MPBI). As the Pension Risk Transfer (PRT) market continues to grow, it has become increasingly important to monitor the annuity market for plan sponsors that are considering transferring retiree pension obligations to an insurer. The MPBI uses the FTSE Above Median AA Curve, along with annuity purchase composite interest rates from insurers, to estimate the average cost of a PRT annuity de-risking strategy.

During January, the estimated cost to transfer retiree pension risk to an insurer remained flat for the month, with costs ticking up only one-tenth of a percentage point, from 104.2% of a plan’s total liabilities to 104.3% of those liabilities. This means the estimated retiree PRT cost for the month is 4.3% more than those plans’ retiree accumulated benefit obligation (ABO). The lack of MPBI movement in January is the result of both discount rates and annuity purchase rates decreasing in parallel by 35 basis points each, which in turn kept the relative cost of annuities stable.

With an increase in activity in the pension risk transfer market in recent years, understanding the correlation between annuity pricing and pension liability is essential. Tracking annuity pricing rates will enable plan sponsors to approach a de-risking strategy armed with more information on cost trends in the market.

Plan sponsors should note that the MPBI is an average cost estimate, and individual plan annuity buyouts can vary based on plan size, complexity, and competitive landscape. Furthermore, specific characteristics in plan design or participant population can affect the cost of a pension risk transfer.

To view the complete Milliman Pension Buyout Index, click here.