Stock Market Downdraft and Interest Rate Decline Hit Funding Status of U.S. Pension Plans, According to BNY Mellon Asset Managem
August 08 2007 - 12:30PM
PR Newswire (US)
PITTSBURGH, Aug. 8 /PRNewswire-FirstCall/ -- A slumping stock
market and a sharp drop in interest rates in July caused a decline
of 4.4 percentage points in the funded status of a typical U.S.
pension plan, according to BNY Mellon Asset Management, which
tracks the health of U.S. pension plans through its BNY Mellon
Pension Liability Indexes. Despite the severity of the July
decline, the typical plan had improved its status by nearly three
percentage points during the first seven months of the year.
"Stocks had their worst month in three years, dropping more than
three percent," according to Peter Austin, executive director of
BNY Mellon Pension Services. "At the same time, long Treasury bond
yields declined 22 basis points, significantly increasing the value
of pension liabilities." Assets of a moderate risk pension
portfolio decreased 1.5 percent in July, while the value of typical
pension liabilities rose 2.9 percent. For the year to date,
however, moderate risk assets are up 3.4 percent while typical
pension liabilities are up 0.5 percent. Lower interest rates
increase liabilities and the value of bonds. Unexpected changes in
a plan's demographics, among other factors, also affect the size of
the benefit liability. The BNY Mellon Pension Liability Indexes,
which were launched in March 2006, are designed to track the market
values and returns of pension liabilities for young, average and
mature pension plans. (See more about the indexes at
http://www.melloninstitutional.com/public/knowledge/publications/content/publi
cations/liability_index.html .) BNY Mellon Asset Management is a
leading global provider of investment management products and
services that offers a broad range of equity, fixed- income, hedge
and liquidity management products through individual asset
management companies and multiple distribution channels. The Bank
of New York Mellon Corporation is a global financial services
company focused on helping clients manage and move their financial
assets, operating in 37 countries and serving more than 100
markets. The company is a leading provider of financial services
for institutions, corporations and high-net-worth individuals,
providing superior asset management and wealth management, asset
servicing, issuer services and treasury services through a
worldwide client-focused team. It has more than $20 trillion in
assets under custody and administration and more than $1 trillion
in assets under management. Additional information is available at
http://www.bnymellon.com/. DATASOURCE: The Bank of New York Mellon
Corporation CONTACT: Mike Dunn of The Bank of New York Mellon
Corporation, +1-212-922-7859, Web site: http://www.bnymellon.com/
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