Pension Planning

Competitive Pricing For Pension Risk Transfer Costs Increase To 100% In June

Plan sponsors must now monitor the annuity market

New market research from Milliman reflects new competition among insurance carriers. Access a complete report here.

SEATTLE, July 23, 2021 /PRNewswire/ — Milliman, Inc., a premier global consulting and actuarial firm, today announced the latest results of its Milliman Pension Buyout Index (MPBI). As the Pension Risk Transfer (PRT) market continues to grow, it has become increasingly important to monitor the annuity market for plan sponsors that are considering transferring retiree pension obligations to an insurer.

During June, the average estimated cost to transfer retiree pension risk to an insurer rose, from 102.0% of a plan’s total liabilities to 102.4% of those liabilities. This means the average estimated retiree PRT cost for the month is now 2.4% more than those plans’ retiree accumulated benefit obligation (ABO). Meanwhile annuity purchase costs reflecting competition amongst insurers also increased, from 99.7% in May to 100.0% in June.

“First quarter pension risk transfer activity had a slow start in 2021 compared to 2019 and 2020, but with scheduled plan terminations on the horizon and an increased interest in retiree buy-outs, activity is expected to increase,” says Mary Leong, a consulting actuary with Milliman and co-author of the study. “Plan sponsors may also be weighing the impact of the American Rescue Plan Act (ARPA-21) on their pension plans before making decisions to de-risk.”

The MPBI uses the FTSE Above Median AA Curve, along with annuity purchase composite interest rates from eight insurers, to estimate the average and competitive costs of a PRT annuity de-risking strategy. Individual plan annuity buyouts can vary based on plan size, complexity, and competitive landscape.

Monitoring The Annuity Buyout Market

As the Pension Risk Transfer market continues to grow, it has become increasingly important for plan sponsors to monitor the annuity buyout market when considering a plan termination or de-risking strategy.

During June 2021, average accounting discount rates decreased by 16 basis points (bps), while annuity purchase rates decreased by 20 bps (average) and 19 bps (competitive). This caused the average estimated retiree buyout cost as a percentage of accounting liability (accumulated benefit obligation) to increase from 102.0% to 102.4%, while the competitive pricing trend increased from 99.7% to 100.0%.

When considering these results, please keep the following information in mind:

  • Annuity pricing composites are provided by the following insurers: Prudential Insurance Company of America, American United Life Insurance Company (OneAmerica), American General Life Insurance Company (subsidiary of AIG), Minnesota Life Insurance Company (Securian), Pacific Life Insurance Company, Metropolitan Tower Life Insurance Company (MetLife), Massachusetts Mutual Life Insurance Company (MassMutual), and Banner Life Insurance Company (Legal & General America).
  • Baseline accounting obligations are estimated using a representative retiree population, the FTSE Above Median AA Curve, and insurance company data.
  • Plan sponsors should note that specific characteristics in plan design or participant population could make settling pension obligations with an insurer more or less costly than estimated.

To view the complete Milliman Pension Buyout Index, visit here.




About Milliman
Milliman is among the world’s largest providers of actuarial and related products and services. The firm has consulting practices in healthcare, property & casualty insurance, life insurance and financial services, and employee benefits. Founded in 1947, Milliman is an independent firm with offices in major cities around the globe. For further information, visit