The estimated cost to transfer retiree pension risk to an insurer in a competitive bidding process increased from 101.4% to 101.6% of a plan’s accounting liabilities (accumulated benefit obligation, or ABO) in January, according to the latest Milliman Pension Buyout Index (MPBI). That means the estimated retiree pension risk transfer cost is now 101.6% of a plan’s ABO.
During the same time period, the average annuity purchase cost across all insurers in the index also increased, from 104.0% to 104.3%. The competitive bidding process is estimated to save plan sponsors about 2.7% of PRT costs as of January 31.
“The PRT market is off to a hot start in 2025,” said Jake Pringle, Principal at Milliman and co-author of the MPBI. “In fact, so far this year we’ve seen some hyper-competitive transactions where the bidding process results in a buyout cost that is even lower than our competitive MPBI rate.”
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.
