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Retirement Planning > Retirement Investing > Annuity Investing

Dietrich Pension Risk Transfer Index: More of the same

By Michael K.Stanley

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A key measure of the relative attractiveness of annuitizing pension liabilities was slightly down in May.

The Dietrich Pension Risk Transfer Index, published by Dietrich & Associates, dropped to 85.1 from 86.61 in April.

The downturn in the index was attributed to by continued declining interest rates for the third consecutive month, which in turn, push pension funding levels down. With a current annuity discount rate proxy of 2.39 percent, the downward trend is expected to continue while its spread versus Treasuries grows.

The trend of settling pension liability via annuitization has been gaining significant steam recently. The index impacts settlement costs, with higher index values denoting a reduction in the settlement cost environment.

“The roller coaster ride continues. We’ve been dealing with rate volatility for a while now — it’s more of the same really. Annuity purchase rates have been relatively steady though, if history repeats itself then we expect to see a favorable window of opportunity opening up in the coming months — get prepared and stay tuned,” said Geoff Dietrich, vice president of Dietrich & Associates.

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