The latest Milliman Pension Buyout Index (MPBI) shows that during March, the estimated cost to transfer retiree pension risk to an insurer in a competitive bidding process climbed from 101.7% to 102.5% of a plan’s accounting liabilities (accumulated benefit obligation, or ABO). That means the estimated retiree PRT cost is now 102.5% of a plan’s ABO.
During the same time period, the average annuity purchase cost across all insurers in the index also rose from 104.3% to 104.7%. The competitive bidding process is estimated to save plan sponsors about 2.2% of PRT costs as of 31st March 2025.
“Although interest rates ended the month close to where they started, there was a lot of movement in March largely due to tariff policy shifts and economic volatility. Ultimately, accounting rates rose slightly while annuity purchase rates declined a touch, causing the monthly competitive MPBI to rise to 102.5%,” said Jake Pringle, Milliman Principal and Co-Author of the MPBI.
“Plan sponsors with PRT projects are keeping an eye on those interest rates as they ultimately determine the cost to buy annuities for their participants,” he added.
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.
