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. Figure 1 illustrates retiree buyout costs with two different metrics: The red line represents only the most competitive insurers' rates from each month, while the blue line represents a straight average of all insurers' rates in this study.

These metrics demonstrate two important concepts. First, the competitive bidding process is estimated to save plan sponsors on average around 2.7% as of October 31. Second, retirees can be annuitized for an estimated 101.2% of accounting liabilities (accumulated benefit obligation).

During October 2024, average accounting discount rates increased by 40 basis points (bps), while competitive annuity purchase rates increased by 46 bps. This caused the estimated competitive retiree buyout cost as a percentage of accounting liability to decrease from 101.7% to 101.2%.

Figure 1: Milliman Pension Buyout Index as of October 31, 2024

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 Financial), American General Life Insurance Company (subsidiary of Corebridge Financial), Minnesota Life Insurance Company (Securian), Pacific Life Insurance Company, Metropolitan Tower Life Insurance Company (MetLife), Massachusetts Mutual Life Insurance Company (MassMutual), Banner Life Insurance Company (Legal & General America), and American National Insurance Company (ANICO).
• A representative retiree population was used.
• Baseline accounting obligations are estimated using the FTSE Above Median AA Curve. The ratio will be different for plans that use other methods to develop their discount rates.
• 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.

About the MPBI

The Milliman Pension Buyout Index (MPBI) uses the FTSE Above Median AA Curve and annuity purchase composite interest rates from nine insurance companies to estimate the cost, as a percentage of accounting liability, of transferring retiree pension obligations to an insurer. To review previous monthly findings, visit milliman.com/en/periodicals/Milliman-Pension-Buyout-Index.