Dietrich Pension Risk Transfer Index remains flat

March 18, 2013 at 10:37 AM

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A key measure of the relative attractiveness of annuitizing pension liabilities ticked slightly upward in March.

The Dietrich Pension Risk Transfer Index, published by Dietrich & Associates, increased to 86.98 in March from 86.71 in February.

The index, which tracks the allure of annuitizing pension liabilities — a trend that is becoming increasingly popular — provides monthly directional data on the market.

The index is also known to affect settlement costs with higher index values denoting a reduction in the settlement cost environment.

The slight rise in the index was attributed to flat pension funding levels. The current annuity discount rate proxy embedded within the index dropped five basis points and now sits at 2.56 percent. That change, however, was offset by a slight increase in interest rate spread levels.

Jay Dinunzio, senior consultant at Dietrich & Associates said, "The economic outlook remains uncertain. Equity indices are reaching historical highs, against a backdrop of political dysfunction surrounding the nation's budget and debt issues. One thing remains clear that pension funding levels have improved significantly over the last six months, and now may be an ideal time for pension committees to reconsider their strategic asset allocation and further investigate the cost/benefits of a pension risk transfer transaction."

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