The Dietrich Pension Risk Transfer Index May 2013- Pension Annuitization Attractiveness Stable Through Waning Rate Environment

By Dietrich & Associates


May 16, 2013 - The Dietrich™ Pension Risk Transfer Index, which tracks the relative attractiveness of annuitizing pension liabilities, declined slightly from April’s value of 86.61 to settle at 85.81 as of May 1, 2013.  The change was driven by declining interest rates for the third straight month pushing pension funding levels downward.  The index’s current annuity discount rate proxy of 2.39% continues trending downward ever so slightly while its spread versus Treasuries is growing. 

“The roller coaster ride continues.”, notes Geoff Dietrich, Vice President of Dietrich & Associates. “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, and 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. ”

The Dietrich Pension Risk Transfer Index™ provides a dynamically constructed, monthly directional data-point regarding the market conditions which affect settlement costs. Higher index values indicate a reduction in the settlement cost environment.  The index was designed to provide pension stakeholders a thoughtful mechanism for monitoring settlement market conditions, and to support effective plan governance and decision making.

The Dietrich™ Pension Risk Transfer Index can be found at www.dietrichassociates.com