As the year draws to a close, pension plan sponsors may want
to consider annuitizing their pension liabilities. Throughout 2013, the
Dietrich Pension Risk Transfer Index, which analyzes the relative
attractiveness of annuitizing pension obligations, has climbed steadily upward,
ending at 97.12 as of Dec. 1, slightly up from November’s figure of 97.10.
Meanwhile, the index’s current annuity discount rate proxy
rose five basis points to 3.26 percent. In short, the index tracks market
conditions that impact settlement costs. A higher index value means settlement
costs have been reduced. Consequently, the index’s ascendance indicates the
time is right to undertake a pension risk transfer deal by the end of this year
and into the next.
Geoff Dietrich, vice president of Dietrich & Associates,
which compiles the index, said in a statement that as pension funding levels
and interest rates continue to rise in lockstep, plan sponsors are taking
action.
“Plan sponsors who actively considered their insured risk
transfer options in 2013 are now harvesting their efforts,” Dietrich stated.
“The increase in activity is a direct result of educated, risk-adverse sponsors
who understand their transfer options and the drivers behind affordability, in
connection with active monitoring of market conditions.”
Source: LifeHealthPro.com
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