Dietrich Pension Risk Transfer Index slightly down

A key measure of the relative attractiveness of annuitizing pension liabilities was slightly down in April.

The Dietrich Pension Risk Transfer Index, published by Dietrich & Associates, dropped to 86.61 from 86.98 in March.

The downturn in the index was attributed to declining interest rates for the second consecutive month in the face of continued gains in pension funding levels. With a current annuity discount proxy of 2.51 percent, the index was consistent with the average of the last six months but is trending downward over the last 12 months.

The trend of settling pension liability via annuitization has been gaining significant steam recently. The index impacts settlement costs, with higher index values denoting a reduction in the settlement cost environment.

“With more and more plan sponsors settling pension liability via annuitization, appetite for risk, understanding cost factors and monitoring market conditions will continue to be top priorities for prepared sponsors considering settlements. Who knows if we have hit bottom or will continue the downward trend for the foreseeable future,” said Geoff Dietrich, vice president of Dietrich & Associates.

 

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