Milliman, Inc., a consulting and actuarial firm, has released its latest Milliman Pension Buyout Index (MPBI), revealing a meaningful reduction in the estimated cost of transferring retiree pension liabilities to insurers.
According to Milliman’s April 2025 analysis, the cost of executing a pension risk transfer (PRT) through a competitive bidding process fell from 102.5% to 101.1% of a plan’s accounting liabilities, as measured by the accumulated benefit obligation (ABO).
In the same period, Milliman notes that the average cost of annuity purchases across all insurers included in the index declined from 104.7% to 104.1%.
These figures suggest that plan sponsors who pursue a competitive bidding approach could realise cost savings of approximately 3.0%—the most significant margin observed in nearly a year. This updated index offers encouraging news for sponsors looking to reduce risk and manage pension liabilities more efficiently.
“April spelled good news for plan sponsors looking to de-risk, as the competitive buyout cost reached a 3% differential for the first time in nearly a year – highlighting the importance of managing a PRT project to maximize insurer interest,” added Jake Pringle, Milliman principal and co-author of the MPBI.
Milliman’s MPBI tracks annuity pricing by comparing the FTSE Above Median AA Curve—used by many plan sponsors to calculate accounting obligations—with group annuity interest rates sourced from nine participating insurers.
This comparison provides an estimate of both the average and most competitive costs to transfer pension liabilities to an insurance provider.
According to Milliman’s April 2025 update, a 3-basis-point increase in the accounting discount rate was accompanied by a 20-basis-point rise in competitive annuity purchase rates.
The resulting 17-basis-point gap between the two measures contributed to the observed drop in the cost of annuitising retiree obligations relative to accounting liabilities.
As presented in the MPBI, two trends are particularly significant. First, the competitive bidding process continues to offer material savings to plan sponsors—about 3.0% as of April 30, based on Milliman’s analysis. Second, it is now estimated that retiree liabilities can be settled at approximately 101.1% of the ABO, reflecting improved pricing conditions in the market.
Milliman also notes that the figures in the index are based on a representative retiree population and may not fully reflect variations in plan size, design, or demographics.
The firm advises plan sponsors that annuity pricing can differ significantly depending on these factors, and actual results may vary accordingly.
Additionally, while the MPBI uses the FTSE Above Median AA Curve as a baseline for estimating accounting liabilities, individual plans that use alternative methodologies for setting discount rates may observe different outcomes.
The insurers contributing annuity pricing data to Milliman’s index include major industry players such as Prudential, MetLife, MassMutual, Pacific Life, and others. Their participation provides a broad perspective on market trends and competitive dynamics within the pension buyout space.
With interest in pension risk transfer continuing to grow, Milliman emphasises that regular monitoring of annuity market conditions is critical for plan sponsors considering de-risking strategies or plan terminations.
The April 2025 update to the Milliman Pension Buyout Index illustrates how market fluctuations can influence buyout pricing and reinforces the strategic value of engaging in a competitive bidding process to reduce pension costs.
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