The average surrender rate of all MPBI insurers hits a low of 101.5%
SEATTLE, August 22, 2022 /PRNewswire/ — Milliman, Inc., a leading global consulting and actuarial firm, today announced the latest results for its Milliman Pension Buyout Index (MPBI). As the retirement risk transfer (PRT) market continues to grow, it has become increasingly important to monitor the annuity market for plan sponsors considering transferring retiree pension obligations to an insurer.
In July, the estimated cost of transferring retiree pension risk to an insurer through a competitive bidding process fell from 98.3% of a plan’s total liabilities to 98.0% of this liability. For these plan sponsors, the estimated cost of ERP for retirees is now 98.0% of the accrued benefit obligation (ABO) for retirees in these plans. Over the same period, the average cost of purchasing an annuity across all insurers in our index also fell from 103.0% to 101.5% – a record high for the MPBI. Despite this, the competitive bidding process is still estimated to save plan sponsors approximately 3.4% of TRP costs from July 31.
“Another MPBI record for retiree buyout costs suggests the pension risk transfer market hasn’t lost momentum,” says Mary Leong, consulting actuary at Milliman and co-author of the MPBI. “Historically, 65-75% of single premium sales (buy-ins and buy-outs) occur in the second half, so it will be interesting to see what sales look like as 2022 progresses.”
The MPBI uses the FTSE curve above the AA median, together with the composite annuity purchase interest rates of eight insurers, to estimate the competitive and average costs of a PRT annuity de-risking strategy. Individual plan annuity buyouts may vary depending on plan size, complexity and competitive landscape.
To view the full Milliman Pension Buyout Index, go to https://www.milliman.com/mpbi. To receive regular updates on Milliman’s pension buyout analysis, contact us at [email protected].
About Milliman
Milliman is one of the world’s largest providers of actuarial and related products and services. The firm has consulting practices in the areas of health, property and casualty insurance, life insurance and financial services, as well as employee benefits. Founded in 1947, Milliman is an independent company with offices in major cities around the world. For more information, visit milliman.com.
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