Pension Risk Transfer Affordability Unchanged

May 18, 2012 ( - The Dietrich Pension Risk Transfer Index, which tracks the relative attractiveness of annuitizing pension liabilities, was nearly unchanged from its prior month’s level of 89.44.

It currently sits at 89.59 as of May 1.  The index witnessed U.S. Treasury and corporate bond yields drop significantly more than group annuity rates (which were also lower and currently sit at 2.98%). This increase in annuity value offset a reduction in plan funding to keep the index relatively unchanged from last month.  

According to Jay Dinunzio, Senior Consultant at Dietrich & Associates: “This month’s pension risk transfer index suggests that currently available annuity yields are offering a superior value relative to spot rate yields on corporate bonds of similar duration. This may present an attractive opportunity to immunize or eliminate retired life liabilities via an annuity purchase. This strategy can reduce the size and complexity of a pension program while allowing remaining pension plan assets to focus exclusively on generating returns needed to keep projected costs low and close funding gaps.”  

The Dietrich Pension Risk Transfer Index can be found at