Value Increase for Pension Risk Transfer Index

The index, which tracks the relative attractiveness of annuitizing pension liabilities, went from a value of 96.19 in October to 97.10 as of November 1. In addition, the index’s current annuity discount rate proxy of 3.21% remains the same, despite the price of Treasuries and corporate bonds increasing.

“This month’s index is another good example of the dynamic nature of the pension risk transfer market,” says Geoff Dietrich, vice president of Dietrich & Associates. He points out that long term interest rates are down nearly 25 basis points since their high this summer, yet the cost to annuity pension liabilities is down 2% to 4% since then.

“Whether or not a transfer is in your immediate future, there is little doubt that it makes sense to understand the magnitude of your pension liability, monitor the effects of today’s markets and be in position to act when the things align,” Dietrich recommends to plan sponsors.

The index continues to show encouraging signs for executing pension risk transfer strategies, says Dietrich, which is good news for plan sponsors contemplating a year-end pension risk transfer.

The index provides a dynamically constructed, monthly directional data point regarding the market conditions that affect settlement costs. It is designed to provide pension stakeholders a mechanism for monitoring settlement market conditions, and to support effective plan governance and decisionmaking.

More information about the index can be found here.