30 December 2025

Pension Risk Transfer Premiums More Competitive

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Pension risk transfer premiums became more competitive in October as deal volume is set to increase in the fourth quarter, a study by Milliman showed. 

The estimated buyout cost as a percentage of accounting liabilities (accumulated benefit obligation) was 102.5% as of Oct. 31, down from 102.7% as of Sept. 30, according to a report of the Milliman Pension Buyout index. September's premium was up significantly from 102.2% as of Aug. 31.

Meanwhile, the average annuity purchase rates among the most competitive rates fell in October to 99.4% from 100.2% a month earlier. The index for competitive pricing stayed at 100.1% as of Aug. 31.

"Derisking activity typically increases toward year-end, and with only four non-holiday weeks left in 2021 we may see some insurers offering more competitive pricing rates to capture those last Q4 deals," said Mary Leong, a consulting actuary with Milliman and co-author of the study, in a news release.

Average accounting discount rates remained level in October from the previous month, while annuity purchase rates increased by 2 basis points on average and 9 basis points for the most competitive rates, according to the study.

The Milliman Pension Buyout index uses the FTSE Above Median AA Curve and insurers' composite interest rates to estimate the average cost of pension risk transfer transactions.

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