Better pension funding levels and a widening of spreads between corporate bonds versus Treasuries helped lift the relative attractiveness of annuitizing pension liabilities for another month. That’s according to the most recent Dietrich Pension Risk Transfer Index, which pegged the value of annuitization at 96.19 as of Oct. 1, up from September’s level of 94.77.
A higher index value indicates a reduction in the settlement costs associated with annuitizing pension obligations. The index is constructed by weighing all market conditions that would impact pension transfer costs.
Likewise, the index’s current annuity discount rate proxy stands at 3.21 percent, down two basis points since last month.
Rising interest rates did not play a role in the index’s month-over-month improvement, according to Geoff Dietrich, vice president of Dietrich & Associates.