July 2025 Pension Risk Transfer Pricing Update
The extension of the U.S. tariffs now through August 1, 2025, offers plan sponsors a critical – and potentially final – chance to move quickly and de-risk in a window of favorable market stability.
Executive Summary
Moving into the second half of 2025, rates are still showing stability and remain in a favorable position. With the recent news of the tariff extension now in effect through August 1, 2025, plan sponsors have a renewed window of opportunity to implement de-risking strategies in a relatively stable market environment.
Last month, LIMRA reported the total U.S. pension risk transfer premiums totaled $7.1 billion in Q1, down 51% from the historic high we saw in Q1 of 2024 but still 10% higher than Q1 of 2023. There was a noticeable slowdown early this year, but activity is now accelerating—signaling that plan sponsors looking to de-risk should engage an annuity consultant sooner rather than later to achieve their goals.
Timing is a critical component when it comes to derisking. In June 2024, A Northeastern medical company discovered that its pension plan—already nearly fully funded—could not be terminated as initially planned, prompting the sponsor to engage October Three for a revised liability-transfer strategy. Working closely with the investment advisor, October Three executed a hybrid approach combining a Pension Risk Transfer annuity and lump-sum payouts, negotiated $1 million in annuity premium savings, and achieved full termination by year-end.
Pricing Update
Annuity Purchase Interest Rates
Annuity purchase interest rates remained relatively stable throughout the second quarter of 2025. As noted in the Pension Finance Update for the first half of 2025, strong stock returns outpaced liability growth, contributing to another positive month for pensions. Rates dipped slightly at the beginning of the month but still remain in a favorable position. The average duration 7 rate is 4.81% while the average duration 15 rate stands at 4.96%. With volatility and uncertainty expected to intensify in the markets in the next month with the new tariff extension closing, now may be the best opportunity for plan sponsors to act and capitalize on the current market stability and secure the favorable rates.

Historical Annuity Rates
As seen below, the 10-year treasury rates correlate with the duration 7 annuity purchase interest rates. Similarly, the 30-year treasury rates correlate with the duration 15 annuity purchase interest. Since the start of 2025, the spread between the 10-year and 30-year Treasury rates has widened by 30 basis points. Both rates started lower at the beginning of the month but have since trended upwards. The 10-year Treasury rate began the month at 4.26% and has seen an increase of 4.42%. Similarly, the 30-year Treasury rate started at 4.78% and has increased to 4.94%. With potential market volatility and uncertainty expected later in the year, plan sponsors are encouraged to take advantage of current market conditions and de-risk while pricing and rates remain favorable.

Annuity Costs Relative to GAAP
The graph below shows the spread between the annuity purchase price and the GAAP projected benefit obligation (PBO), also referred to as the accounting book value. Since June, this spread saw a decrease of 4.39% for Annuity Plan 1 and .22% for Annuity Plan 2. As annuity purchase rates decrease, purchase prices rise relative to the PBO. This shrinkage may suggest an opportune time for Plan Sponsors looking to de-risk to transact. Please note that the PBO figures shown do not include future overhead costs—such as administrative expenses and PBGC premiums—that plan sponsors would incur by retaining participants in the plan.

An October Three Case Study
A prominent medical company in the Northeastern U.S. was contending with rising expenses and growing obligations tied to its frozen defined benefit pension plan. By March 2024, the plan was almost fully funded, prompting the sponsor to aim for termination by the end of the year. However, in June, the plan actuary reported that the original timeline was no longer feasible. This drove the Plan Sponsor to engage October Three to revise the liability transfer strategy to capture cost savings in 2024.
The plan sponsor engaged October Three to lead the termination process, leveraging their full suite of actuarial expertise, pension-risk-transfer services, and dedicated plan administration support. In close collaboration with the investment advisor, October Three evaluated multiple de-risking strategies and determined that a hybrid solution—combining a Pension Risk Transfer annuity purchase with a lump-sum option—offered the most cost-effective route to plan termination. Acting swiftly and strategically, October Three negotiated favorable terms for the annuity placement, securing $1 million in savings for the plan and successfully terminated the plan before the conclusion of 2024. The plan sponsor expressed strong satisfaction with the outcome, praising the seamless coordination and efficiency demonstrated by the October Three team.
While we successfully met the client’s tight deadline, best practices indicate that initiating discussions with an annuity provider early in the process is advantageous for the Plan Sponsor. Early engagement allows you to explore a broader range of options and give your team the time necessary to develop the most suitable strategy.

For additional information or inquires about the pension risk transfer marketplace, contact Mark Unhoch: munhoch@octoberthree.com.
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*October Three advises plan sponsors through every step of the Pension Risk Transfer (PRT) process. Through long established relationships with insurers in the PRT marketplace, October Three collects annuity purchase rates for Duration 7 years and Duration 15 years on a monthly basis. We have constructed 2 hypothetical annuity plans which have been valued using the latest mortality tables and mortality improvement scales. Annuity Plan 1 contains retirees only and has a liability duration of 7 years. Annuity Plan 2 contains 70% retirees and 30% deferreds and has a liability duration of 15 years. Monthly annuity rates are determined by taking the average Duration 7 and Duration 15 interest rates provided from the insurers. Annuity Plan 1 was valued using the average of the Duration 7-year interest rates collected from insurers and Annuity Plan 2 was valued using the average of the Duration 15-year interest rates collected from insurers. Using the collected annuity purchase rates and 2 hypothetical annuity plans, we have produced the following graphs representative of actual PRT market activity and the corresponding impact on pension plans.