The funded status of the typical U.S. corporate pension plan rose 1.7% in January to 74.1%, according to BNY Mellon. The rise was due to stronger equity markets in the U.S. and around the world, the firm says.
Assets in the average plan rose by 3.4%, BNY Mellon says, compared to a 1.1% increase in liabilities. The rise in liabilities was due to tightening Aa corporate bond spreads, which resulted in a six-basis-point decline in the Aa corporate discount rate to 4.30%, the firm says.
“The choppy recovery for pension plans continues as the funded status has risen from the nadir of 70.1% at the end of September 2011,” says Jeffrey B. Saef, managing director of BNY Mellon Asset Management and head of the BNY Mellon Investment Strategy & Solutions Group. “This improvement has been largely due to the rally in equities, which has boosted asset values, as low interest rates have continued to prop up liabilities.”
Pension plans in the U.S. are gradually recovering from steep declines in their average funded status in 2011. BNY Mellon data show the average funded status at 72.4% at the end of 2011, a drop of 12% over the previous year-end figure. Mercer, which calculates its funded status data based on the pension plans of S&P 1500 companies, says the funded status of those plans was 75% at the end of 2011 compared to 81% at the end of 2010.
(CG)