Pension Plans Await Higher Equity Values To Meliorate Funding Status, BNY Mellon Asset Management

Funding ratios at the typical U.S. corporate pension plan dropped six percentage points in February as falling equity markets continued to reduce the value of assets in moderate risk pension portfolios, according to BNY Mellon Asset Management. Moderate risk assets

By None

Funding ratios at the typical U.S. corporate pension plan dropped six percentage points in February as falling equity markets continued to reduce the value of assets in moderate risk pension portfolios, according to BNY Mellon Asset Management.

Moderate risk assets declined 6.4% in February, while liabilities for these plans decreased 0.6% during the month. For the year to date, the funding ratio for the typical plan has declined one percentage point, as represented by the BNY Mellon Pension Liability Index. Since the beginning of 2008, the funded ratios for these plans have fallen 32.3 percentage points.

“Rapidly falling equity values continue to inflict pain on U.S. pension plans,” says Peter Austin, executive director of BNY Mellon Pension Services.

“U.S. stocks fell for a second straight month and have dropped 18% so far this year. International stock markets have done even worse. Pension plans had some very minor relief from the widening of corporate bond spreads, which drove the small drop in liabilities.”

“The threat remains that these spreads will narrow and that corporate bond yields will fall. When that happens, we will see another rise in liabilities. Pension plans remain hopeful that higher equity values will help asset levels and improve funded status. With considerable skepticism regarding such a rally, we see continuing interest from plans seeking to manage their exposure to pension liabilities.”

L.D.

«