Tag Archives: MPBI

Competitive pricing rate for pension risk transfer costs drops to 99.1% in December, setting another record low

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.

During December, the average estimated cost to transfer retiree pension risk to an insurer remained flat, at 101.8% of a plan’s total liabilities. This means the average estimated retiree PRT cost for the month is now 1.8% more than those plans’ retiree accumulated benefit obligation (ABO). Annuity purchase costs reflecting competition among insurers once again hit a record low, dropping from 99.4% in November to 99.1% in December. This is the second time competitive rates have dipped below 100% since Milliman began tracking the MPBI.

Pension risk transfer activity for 2020 ended on a strong note, given the slow start at the beginning of the year. Low pricing rates may have spurred buyouts in the fourth quarter (Q4), but we’ll see if the trend continues into 2021.

The MPBI uses the FTSE Above Median AA Curve, along with annuity purchase composite interest rates from eight insurers, to estimate the average and competitive costs of a PRT annuity de-risking strategy. Individual plan annuity buyouts can vary based on plan size, complexity, and competitive landscape.

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

Competitive pricing rate for pension risk transfer costs drops to 99.4% in November, setting record MPBI low

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.

During November, the average estimated cost to transfer retiree pension risk to an insurer decreased by 110 basis points, from 102.9% of a plan’s total liabilities to 101.8% of those liabilities. This means the average estimated retiree PRT cost for the month is now 1.8% more than those plans’ retiree accumulated benefit obligation (ABO). Annuity purchase costs reflecting competition among insurers are even lower, dropping from 100.3% in October to 99.4% in November. This is the first time competitive rates have dropped below 100% since Milliman began tracking the MPBI.

November’s record-low competitive buyout pricing rate, at 99.4%, reflects what we’ve been seeing for some plans in the market. While the buyout market softened in 2020 as a result of the COVID-19 pandemic, low competitive rates may spur activity as we close out the year and move into 2021.

The MPBI uses the FTSE Above Median AA Curve, along with annuity purchase composite interest rates from eight insurers, to estimate the average and competitive costs of a PRT annuity de-risking strategy. Individual plan annuity buyouts can vary based on plan size, complexity, and competitive landscape.

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

Estimated cost of retiree pension risk transfer as low as 100.3% in October, under competitive pricing rate

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. While we continue to analyze annuity purchase rates from all insurers, Milliman has also expanded its research to reflect the impact of competitive pricing on estimated buyout cost.

During October, the average estimated cost to transfer retiree pension risk to an insurer increased by 60 basis points, from 102.3% of a plan’s total liabilities to 102.9% of those liabilities. This means the average estimated retiree PRT cost for the month is now 2.9% more than those plans’ retiree accumulated benefit obligation (ABO). Annuity purchase costs reflecting competition among insurers are even lower, at 100.3%, up from 100.2% in September.

At just 100.3%, October’s competitive buyout pricing trends continue to offer an attractive de-risking strategy for some plans. Perhaps as a result, insurers have seen an uptick in pension risk transfer (PRT) activity in the third and fourth quarters of 2020, as plan sponsors complete transactions prior to year-end.

The MPBI uses the FTSE Above Median AA Curve, along with annuity purchase composite interest rates from eight insurers, to estimate the average and competitive costs of a PRT annuity de-risking strategy. Individual plan annuity buyouts can vary based on plan size, complexity, and competitive landscape.

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

Milliman expands Pension Buyout Index to include competitive pricing rate, which drops to 100.2% in September

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. While we continue to analyze annuity purchase rates from all insurers, starting this month Milliman has expanded its research to reflect the impact of competitive pricing on estimated buyout cost, and added two new insurers to our index: Massachusetts Mutual Life Insurance Company (MassMutual), and Banner Life Insurance Company (Legal & General America).

During September, the average estimated cost to transfer retiree pension risk to an insurer decreased by 60 basis points, from 102.9% of a plan’s total liabilities to 102.3% of those liabilities. This means the average estimated retiree PRT cost for the month is now 2.3% more than those plans’ retiree accumulated benefit obligation (ABO). Annuity purchase costs reflecting competition among insurers are even lower at 100.2% (down from 101.0% in August).

At just 100.2%, September’s low competitive buyout rate indicates that some plans may have been able to transfer pension risk at a cost that is only a fraction higher than the plan’s accounting liability. Similarly, September’s average buyout rate, at 102.3%, is the lowest we’ve seen since launching Milliman’s Pension Buyout Index.

The MPBI uses the FTSE Above Median AA Curve, along with annuity purchase composite interest rates from eight insurers, to estimate the average and competitive costs of a PRT annuity de-risking strategy. Individual plan annuity buyouts can vary based on plan size, complexity, and competitive landscape.

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

Estimated cost of retiree pension risk transfer increases from 102.8% to 103.2% in August

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 August, the estimated cost to transfer retiree pension risk to an insurer increased by 40 basis points, from 102.8% of a plan’s total liabilities to 103.2% of those liabilities. This means the estimated retiree PRT cost for the month is now 3.2% more than those plans’ retiree accumulated benefit obligation (ABO). Accounting discount rates in August rose 24 basis points compared to a 20 basis point increase for annuity purchase rates, resulting in a slight rise in the relative cost of annuities.

The cost of pension risk transfer has begun to tick back up after July’s record-low rate of 102.8%. As interest rates rebound, and annuity purchase rates slowly follow suit, we will be watching closely to see if insurers keep up with the current climb in fixed income yields.

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 decreases from 104.2% to 102.8% in July

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 July, the estimated cost to transfer retiree pension risk to an insurer decreased by 140 basis points, from 104.2% of a plan’s total liabilities to 102.8% of those liabilities. This means the estimated retiree PRT cost for the month is now 2.8% more than those plans’ retiree accumulated benefit obligation (ABO). Accounting discount rates in June dropped 37 basis points compared to a 22 basis point drop for annuity purchase rates, resulting in a decrease in the relative cost of annuities.

July’s drop in discount rates continued to drive an already historically low interest rate environment down even further. Insurers dropped their rates as well but didn’t keep up with the steep fall in fixed income yields, which led to the retiree buyout improvement. At 102.8%, this is the lowest rate we’ve seen since launching Milliman’s Pension 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.