Consulting firm Milliman’s latest Milliman Pension Buyout Index (MPBI) suggests 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 in September.
The estimated retiree PRT cost is now 101.7% of a plan’s ABO. During the same time period, the average annuity purchase cost across all insurers in our 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 September 30.
“In September, we saw IBM announce a $6bn PRT transaction, a good indication that the market will remain active as we enter the 4th quarter of another busy PRT year,” said Milliman Principal Jake Pringle.
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.
