Milliman reports increase in pension risk transfer costs in Feb

Milliman, a global consulting and actuarial firm, has recently released the results of its Milliman Pension Buyout Index (MPBI), highlighting a slight increase in pension risk transfer costs at the end of February.

As the pension risk transfer (PRT) market grows, it’s crucial for plan sponsors considering shifting retiree pension obligations to insurers to keep an eye on the annuity market.

Milliman reports that the estimated competitive pension risk transfer costs increased from 101.8% to 102.1% in February. Therefore, the estimated PRT cost for retirees now stands at 102.1% of a plan’s ABO.

During the same period, the average cost of purchasing annuities from all insurers in its index remained stable at 103.6%. The competitive bidding process is expected to save plan sponsors approximately 1.5% of PRT costs as of February 29.

Jake Pringle, a Milliman principal and co-author of the MPBI, comments, “Even competitive buyout costs are continuing to climb, reaching the highest level we’ve seen in almost four years.”

“Despite this, we also saw Verizon announce a $5.9 billion transaction, so the PRT market remains hot despite the environment,” Pringle adds.

As reported by Legal & General, 2023 was a record-breaking year for the pension risk transfer market.

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