Consulting firm Milliman has published the latest results of its Milliman Pension Buyout Index (MPBI).
During September, the estimated cost to transfer retiree pension risk to an insurer in a competitive bidding process rose from 100.8% of a plan’s accounting liabilities (accumulated benefit obligation, or ABO) to 101.7% of those liabilities.
That means the estimated retiree PRT cost is now 101.7% of a plan’s ABO. During the same period, the average annuity purchase cost across all insurers in the index also increased, from 104.1% to 104.4%. The competitive bidding process is estimated to save plan sponsors about 2.7% of PRT costs as of 30th September.
“In September, we saw IBM announce a $6 billion PRT transaction, a good indication that the market will remain active as we enter the fourth quarter of another busy PRT year,” said Jake Pringle, a Milliman Principal and co-author of the MPBI.
The MPBI uses the FTSE Above Median AA Curve, along with annuity purchase composite interest rates from nine insurers, to estimate the competitive and average costs of a PRT annuity de-risking strategy.