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As we conclude 2025, the landscape for annuity purchase interest rates has remained relatively stable, with minimal fluctuations observed during these final months of the year. Amid the Federal Reserve’s 25 basis-point rate cut at the end of October as well as the recent government shutdown, activity in the PRT marketplace has surged with plan sponsors rushing to complete transfers before year-end. Though it may be too late to transact in 2025, plan sponsors should proactively connect with annuity search firm to position their plans in an advantageous position to secure timely and optimal de-risking options as market opportunities arise in 2026.
Amidst the economic volatility and uncertainty in 2025, the Pension Risk Transfer marketplace has successfully navigated this environment, exhibiting continuous pockets of favorable conditions for transactions. The stability and competitiveness of the markets are underpinned by the strong and ambitious participation of insurance carriers. Currently, more than 20 insurers actively participate in the Pension Risk Transfer market, all offering annuity contracts that guarantee and secure participant’s future benefits. This growing competition has enhanced plan sponsor assurance in transacting, ensuring they receive optimal pricing and high-quality service. As a result, the PRT market continues to gain momentum as a critical de-risking strategy to secure and protect the future benefits of plan participants.
Entering November of 2025, we saw a very small change in both rates this month. The average duration 7 rate is sitting at 4.64% while the average duration 15 rate slightly rose to 4.79%. The Pension Finance Update reports that stocks rose across the board in October, strengthening pension finances. As seen in the graph below, annuity purchase interest rates have been relatively stable. Rates are consistent with where they were twelve months ago. Even amid marketplace volatility and uncertain economic forecasts, plan sponsors looking to de-risk and have well-funded plans and high-quality participant data should consider engaging with an annuity search firm. This proactive measure facilitates successful and optimal near-term and long-term liability settlement options.
Historical Activity
As of early November, the 10-year treasury rate was approximately 4.11% while the 30-year treasury rate was around 4.67%. This positioning of these rates represents a modest shift compared to early November of 2024, which were approximately 4.37% for the 10-year and 5.57% for the 30-year. These rates are closely aligned with the annuity purchase interest rates, the 10-year treasury correlating to the duration 7 rate, and the 30-year treasury corresponding to the duration 15 rate. Stability in long-duration yields has historically helped minimize any major increases in pension plan liabilities, creating more favorable conditions for plan sponsors when exploring pension risk transfer transactions. Market observers have noted that treasury yields could experience more upward pressure amid growing optimism surrounding the timely resolution of the government shutdown. Since annuity purchases do not need to be on an all or nothing basis, plan sponsors can benefit from proactively exploring strategies to help position their plans for long-term success in the coming years.
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 narrowed. For Annuity Plan 1, the spread was -0.27% while Annuity Plan 2’s spread narrowed to 4.85%. 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.
Could PBGC Guarantees Continue After PRT?
A recent white paper by Kevin O’Brien and Spencer Walters of Ivins, Phillips & Barker has sparked significant discussion across the industry. Under current practice, PBGC protection ends once a plan sponsor completes a Pension Risk Transfer, leaving participants reliant on state guaranty associations if the selected insurer becomes insolvent. The authors argue that PBGC guarantees should continue even after benefits are annuitized, contending that the PBGC has reversed course from its original 1980s position, when it explicitly stated that federal guarantees would remain in place.
The topic is gaining attention, and the outcome could materially reshape the PRT landscape. Extended PBGC protection would represent a major development, meaningfully enhancing participant security in de-risking transactions.
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.