Filed Under:Annuities, Sales Strategies

Time is right to annuitize pensions

Better pension funding levels and a widening of spreads between corporate bonds versus Treasuries helped lift the relative attractiveness of annuitizing pension liabilities for another month. That’s according to the most recent Dietrich Pension Risk Transfer Index, which pegged the value of annuitization at 96.19 as of Oct. 1, up from September’s level of 94.77.

A higher index value indicates a reduction in the settlement costs associated with annuitizing pension obligations. The index is constructed by weighing all market conditions that would impact pension transfer costs.

Likewise, the index’s current annuity discount rate proxy stands at 3.21 percent, down two basis points since last month.

Rising interest rates did not play a role in the index’s month-over-month improvement, according to Geoff Dietrich, vice president of Dietrich & Associates.

“Long-term interest rates have slipped some since the Fed re-adjusted the outlook for their ‘easy money’ policy, but the cost to insure pension obligations via annuitization has not suffered,” Dietrich said in a statement. “This shows us that interest rates are not the sole factor driving the price of the index.”

He further pointed out that interest rates and the cost of pension risk transfers have dropped in lock step. Therefore, low interest rates cannot be used to dismiss undertaking an annuitization of pension obligations.

“This market is dynamic,” Dietrich stated. “There are too many factors involved and the index is proof of that. Dismissing a pension risk transfer due to interest rates alone is not sound decision-making.”

See also:

Featured Video

Most Recent Videos

Behind the scenes with Vicki Gunvalson [VIDEO]


In this exclusive interview, Vicki Gunvalson shares how she built a $15 million a year annuity business by planning for...

Regulator: Market may need to reinvent LTCI


Cioppa says Maine's governor wants to spur the creation of better products.

Dementia: It's more than Alzheimer's


An association calls for policymakers to remember lesser-known neurodegenerative conditions.

Protesters Disrupt WellPoint Annual Meeting


Hecklers call for more disclosures of information about political contributions.

Related resources

More Resources


Power your business with up-to-the-minute insurance news, analysis, and best practices from LifeHealthPro Daily eNewsletter – FREE.

Power your business with LifeHealthPro Daily eNewsletter – FREE.

Enter a valid email address.
Nichole Morford

Nichole Morford
Managing Editor

Thank you for subscribing to LifeHealthPro Daily!

Check Out More eNewsletters Now! Close

Advertisement. Closing in 15 seconds.