The latest results of the Milliman Pension Buyout Index (MPBI) suggest that during February, the estimated cost to transfer retiree pension risk to an insurer in a competitive bidding process ticked up from 101.6% to 101.7% of a plan’s accounting liabilities (accumulated benefit obligation, or ABO). That means 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 the index remained level, at 104.3%. The competitive bidding process is estimated to save plan sponsors about 2.6% of PRT costs as of February 28, 2025.
“LIMRA recently released US-based PRT results for 2024, and despite a slower 4th quarter it was a record-setting year for contracts,” said Jake Pringle, Milliman principal and co-author of the MPBI.
“The industry saw 794 single-premium contracts for the year, representing almost $52 billion in premiums paid to insurers. As we near the end of Q1 with steady retiree buyout costs and high insurer capacity, plan sponsors may find this is an opportunistic time to pursue PRT projects.”
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.