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Dietrich Pension Risk Transfer Index up this month

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A key measure of the relative attractiveness of annuitizing pension liabilities rose in February.

The Dietrich Pension Risk Transfer Index, published by Dietrich & Associates, Plymouth Meeting, Pa. increased to 86.71 in February from 84.92 in January.

The index, which tracks the attractiveness of annuitizing pension liabilities, provides monthly directional data on the market. The Index is known to affect settlement costs with higher index values denoting a reduction in the settlement cost environment.

The rise in the index was precipitated by an increase in the average funded status of pension plans. The annuity discount proxy rate contained within the index also rose, by seven basis points to 2.61 percent.

Over the course of the last month, the market enjoyed a perfect storm of rising asset values and interest rates which contributed to an improvement in the funded status of a typical pension plan. The result was a reduction in the settlement cost environment which piqued the interest of pension committees in considering increasing their allocations to fixed income and pension settlements in order to take advantage of the favorable market conditions.