The lower index value was driven by modestly lower annuity discount rates, lower corporate bond yields and narrower corporate bond spread levels, which overwhelmed a small gain in pension funding. The current index value is at its lowest point since December 2010.
According to Jay Dinunzio, senior consultant at Dietrich & Associates, “Lower returns are increasingly becoming the new normal for pension sponsors who are focused on stabilizing their pension funding. While the current economics of annuitizing pension liabilities may be challenging, frozen pension plan committees may find it useful to establish an agreed upon additional ‘make-whole’ contribution amount that helps support the strategic planning around if and when to execute an annuity transaction.”
The Dietrich Pension Risk Transfer Index can be viewed at https://www.dietrichassociates.com.
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