Pension Risk Transfer Trends and Market Dynamics into 2026
Pension risk transfer (PRT) activity in 2025 showed a decline, with recorded sales of $49 billion, representing a 6% drop from 2024. According to LIMRA’s U.S. Group Annuity Risk Transfer Survey, factors such as market turbulence, litigation concerns, and trade conflicts affected market dynamics. While these challenges are expected to persist into 2026, Paula Cole, Nationwide's head of PRT, suggests that plan sponsors may gain confidence as buy-in transactions grow in popularity.
The previous year ended with 700 transactions, reflecting a 6% downturn in sales and a 12% reduction in transaction volume. Market volatility, looming recession risks, and litigation concerns contributed to plan sponsors' hesitancy, particularly within the jumbo market sector. However, the funded status of significant corporate defined benefit plans improved, making buy-ins more attractive. Data from Milliman’s Multiemployer Pension Funding Study indicated that the funded percentage of multiemployer plans reached 103% by year-end, a notable increase from the previous year.
Looking ahead to 2026, economic uncertainties might continue to influence market hesitation, though Cole forecasts a stable year for PRT activities, potentially mirroring 2025 figures. Noteworthy trends include a rise in buy-in transactions. Buy-ins enable plan sponsors to procure an annuity contract from an insurer while retaining liabilities on their balance sheets, capitalizing on asset-liability matching in a strong funded status environment.
Interest rates remain a significant factor influencing PRT transactions. Nationwide’s Office of Economics anticipates Federal Reserve actions, with expected rate cuts by mid-year potentially affecting pension fund obligations. This could deter larger entities from pursuing jumbo transactions in the forthcoming year.
Ongoing litigation involving PRT providers may impact the market, as court resolutions could influence movements. Despite this, confidence remains in the PRT market, guided by the Department of Labor’s regulatory framework, suggesting potential for increased sponsor engagement as legal uncertainties are resolved.
Over the past decade, PRTs have gained popularity as a safeguard for pension payments. The number of providers offering these transactions has more than doubled, with 23 carriers reported by the end of 2025. This trend is expected to continue, with specialization becoming a key focus.
Moreover, insight into data management, vendor selection, and strategy formation are crucial for optimizing PRT engagements. Accurate data is vital to pricing group annuity products, and advisors are encouraged to prepare clients with digitized participant data. Assembling a competent team comprising actuaries, legal counsel, and administrators is essential for effective transaction processing.
Various PRT strategies, including buy-outs, lump-sum windows, and plan terminations, each present distinct advantages. Buy-outs remove plan liabilities from the sponsor’s balance sheet, while lump-sum options allow participants to receive one-time payments. Plan terminations involve transferring all obligations to an insurer. Evaluating funding levels and benefits formulas is essential for making informed decisions.
Plan sponsors considering alternatives to robust pension benefits might explore transitioning to modernized retirement plans featuring Protected Retirement Solutions. These offer pension-like income possibilities with a structural divergence from traditional pensions.