Tag Archives: Ryan Cook

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 amongst 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/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 amongst 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.

Estimated cost of retiree PRT 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 obligations (ABOs). 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.