The estimated pension risk transfer cost in a competitive bidding process increased to 99.7% of a plan's total liabilities in February from 99.3% in January, according to news release from actuarial and consulting firm Milliman on Friday.
During February, average accounting discount rates increased by 46 basis points, while competitive annuity purchase rates increased by 41 basis points, Milliman said in its Milliman Pension Buyout index.
Also during February, Milliman said the average annuity purchase cost across all insurers in its index rose slightly to 102.8% from 102.5%.
The competitive bidding process is estimated to have saved plan sponsors about 3.1% of PRT costs as of Feb. 28, Milliman said.
"Even with recent volatility in interest rates and financial markets, retiree buyout costs have remained steady over the last six months, and we expect interest in PRT transactions to remain high moving into the second quarter," said Jake Pringle, a principal and consulting actuary at Milliman, in the release. "It will be interesting to see the Fed's (Federal Reserve's) response to the recent collapse of Silicon Valley Bank, and if that will impact the PRT market."
The Milliman Pension Buyout index uses the FTSE Above Median AA Curve and insurers' composite interest rates to estimate the average cost of pension risk transfer transactions.
