Dear Actuary: I’ve heard interest rates may fall soon. Does that mean we should delay a pension risk transfer (PRT)? If rates drop, wouldn’t insurers lower their prices and make a PRT cheaper later?
- Interested in Interest Rates

Dear Interested,

That’s a smart concern, but the opposite is actually true. When rates fall, insurers’ annuity pricing typically rises, which could increase the gap between what you hold on the books (your accounting liability) and what insurers will charge you. You might pay more relative to your liabilities if you delay a pension risk transfer (PRT) in expectation of a better deal. Also consider these points:

• Right now, many insurers are competing hard, which leads to more favorable pricing for sponsors like you. In early 2025, we’ve seen an uptick to an average of five to six insurers bidding per case, up from about four in 2022—meaning better bargaining power and sharper pricing.
• The August 2025 Milliman Pension Buyout Index shows competitive bids are typically around 100.1% of your plan's in-pay accumulated benefit obligation, which offers plan sponsors a savings opportunity of around 4.0% below average pricing.

There may be some reasons for a plan sponsor delaying a PRT, such as locating missing participants, maintaining an overall de-risking strategy, or adhering to other aspects of your plan. If there is a delay, however, some risks have to be taken into account:

• Accounting discount rates could decrease, which typically raises your plan's liability on your books.
• There could be less competition, especially if insurers scale back due to lower discount rates or capacity constraints. This means you’d lose bidding leverage, potentially losing pricing advantage.
• Timing uncertainties exist, as many PRT deals take several months to complete.
• There’s a potential for funded status volatility, depending on your investment returns relative to annuity purchase rates.

Bottom line

If your plan is well-funded and you’ve lined up a competitive PRT, today’s market is strong, offering good pricing and active insurer interest. Waiting may erode that competitive environment, potentially increasing PRT costs or causing delays. That means the window for initiating a PRT now is attractive, but it may not be open forever.

Talk with your consulting actuary to monitor interest rates, annuity pricing, and insurer capacity. That way, you’ll know if the timing is right for your plan.

In short, now is a solid time to consider a PRT unless you’re certain rates will rise significantly and the insurer competition stays at today’s level.

- Your Milliman Actuary

This edition of Dear Actuary was written by Jake Pringle, EA, MAAA.