June 2026 Pension Risk Transfer Pricing Update

Executive Summary

The Pension Risk Transfer market continues to evolve, supported by active insurer participation, increased industry awareness of de-risking strategies and supportive economic environments. The combination of this evolution and favorable conditions persist, the sooner a plan sponsor enters the marketplace, the greater the opportunity to leverage attractive prices and interest rate dynamics.

The positive trend in annuity purchase rates continues to persist throughout 2026, with recent increases pushing the annuity purchase rates and both the 10-year and 30-year treasury rates to annual highs. Engaging with an annuity search firm early in the Pension Risk Transfer process allows plan sponsors to develop a strategic roadmap, prepare participant data thoroughly, and gain a deeper understanding of plan provisions. These are fundamental steps in achieving successful outcomes for both plan sponsors and the participants. High-quality data and clearly defined plan provisions help minimize delays, enhance insurer engagement, and ultimately drive more competitive annuity pricing.  

The Pension Risk Transfer (PRT) market remains highly favorable for defined benefit (DB) plan sponsors in 2026, supported by strong insurer capacity, competitive pricing, elevated interest rates, and historically strong pension funding levels. While many sponsors have delayed pursuing plan termination due to perceived execution timelines or uncertainty surrounding geopolitical and economic developments, many terminations can be successfully completed within six months when supported by a clear strategy, clean data, and experienced consultants. With insurers remaining active despite ongoing market uncertainty, sponsors that begin preparations now can capitalize on favorable conditions, maintain flexibility, and position themselves to fully settle pension liabilities before 2027. Early planning and proactive execution remain critical to achieving a successful and efficient plan termination.

Pricing Update

As the second quarter of 2026 draws to a close, the Pension Risk Transfer market continues to benefit from favorable momentum, with annuity purchase rates continuing their steady increase on this month-to-month basis. The duration 7 annuity purchase interest rate increased 11 basis points from last month, reaching 5.05%, while the duration 15 annuity purchase rate jumped 24 basis points to 5.26%.  Both rates now stand at their highest levels since early 2024, presenting an attractive window for plan sponsors exploring pension de-risking solutions. The Pension Risk Transfer market has experienced significant growth in recent years. Pension risk transfers provide plan sponsors with an effective way to reduce financial volatility and shift focus on other core business objectives. By transferring pension liabilities to an insurance company, plan sponsors can honor their commitments to participants while mitigating exposure to future interest rate fluctuations and other pension related risks.

Historical Activity

Similar to the annuity purchase interest rates, both the 10-year and 30-year treasury rates have reached new highs since early 2025. The 10-year treasury rate began the month at 4.47% and has since increased to 4.56%. Likewise, the 30-year treasury rate started the month at 4.99% and has since risen to 5.03%. The second half of the year traditionally represents peak activity in the Pension Risk Transfer market, often resulting in insurer capacity constraints and calendar conflicts as transaction volume accelerates. For plan sponsors considering a pension de-risking strategy, these market dynamics underscore the importance of early planning and execution. While recent market trends have been favorable, these conditions are unpredictable and could change at any time. Plan sponsors who evaluate their options early may be better positioned to capitalize on today’s opportunities before any market shifts.  

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. This month, the spreads of Annuity Plan 1 and Annuity Plan 2 widened slightly.  For Annuity Plan 1, the spread is -0.41% while Annuity Plan 2’s spread is approximately 5.93%. As annuity purchase rates increase, purchase prices drop relative to the PBO. 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.

The 2026 Window for Pension Plan Terminations Remains Open

The PRT marketplace remains highly active in 2026, with insurers continuing to offer competitive pricing to plan sponsors seeking to terminate their defined benefit (DB) pension plans. Although many sponsors have not yet initiated the termination process, there is still time to complete a plan termination before year-end and fully settle pension liabilities ahead of 2027. Strong insurer capacity, favorable interest rate conditions, and ongoing sponsor interest in pension de-risking continue to support a competitive PRT marketplace

One of the primary reasons sponsors delays pursuing a plan termination is the perception that the process requires 12 to 18 months to complete. While that timeline may be appropriate for plans with complex participant populations, significant data challenges, or extensive governance requirements, many terminations can be completed in as little as six months when sponsors begin with a clear plan of action, clean data, and experienced consultants. By establishing a clear project plan, addressing administrative requirements early, and coordinating efficiently with insurers and service providers, sponsors can significantly accelerate execution while maintaining a disciplined and compliant approach.

Another factor causing some sponsors to postpone termination decisions is uncertainty surrounding recent geopolitical developments, including the conflict involving Iran and the implementation of new tariffs. While such events may lead organizations to defer major strategic initiatives, current market conditions continue to present a compelling opportunity for pension plan termination. Interest rates remain near 15-year highs, and despite ongoing geopolitical uncertainty, equity markets have remained strong, supporting the strongest pension funding levels seen in years.

For sponsors considering a full plan termination, the remainder of 2026 represents a meaningful window to act. Early preparation remains critical and should include participant data validation, benefit calculation reviews, and overall readiness for insurer solicitation. While geopolitical risks and evolving economic conditions may continue to influence capital markets in the months ahead, insurers will remain active and competitive participants in the PRT marketplace. The message for sponsors is clear: although delaying action can compress timelines and limit flexibility, the opportunity to successfully terminate a pension plan this year remains well within reach. October Three has extensive experience managing end-to-end pension plan terminations and has successfully helped sponsors execute full plan terminations within compressed timelines.

For additional information or inquiries 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.