London Market Monitor – 31 August 2022
Our August review of the markets and Solvency II discount rates.
As the Pension Risk Transfer market continues to grow, it has become increasingly important for plan sponsors to monitor the annuity buyout market when considering a plan termination or de-risking strategy. Figure 1 illustrates retiree buyout costs based on both an average of all insurer rates in our study and on just the most competitive rates, which represent the price savings that may be achieved when selecting between bids from multiple insurers.
During October 2021, average accounting discount rates were level, while annuity purchase rates increased by 2 bps (average) and 9 bps (competitive). This caused the average estimated retiree buyout cost as a percentage of accounting liability (accumulated benefit obligation) to decrease from 102.7% to 102.5%. Likewise, the competitive pricing trend decreased from 100.2% to 99.4%.
When considering these results, please keep the following information in mind: