The Markets May 16, 2013

Pension Risk Transfer Attractiveness On Even Keel

Even through a waning rate environment, the relative attractiveness of annuitizing pension liabilities stayed stable.

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The Dietrich Pension Risk Transfer Index took a slight dip from April’s 86.61, settling at 85.81 as of May 1. Declining interest rates for the third straight month drove the change, pushing down on pension funding levels. The index’s current annuity discount rate proxy of 2.39% continues trending downward ever so slightly, while its spread versus Treasuries is widening.

Rate volatility has been an issue for a while, according to Geoff Dietrich, vice president of Dietrich & Associates. He noted, however, that annuity purchase rates have been relatively steady. “If history repeats itself, then we expect to see a favorable window of opportunity opening up in the coming months,” Dietrich said. “Get prepared and stay tuned. The roller coaster ride continues.”

The Dietrich Pension Risk Transfer Index can be found here.