Funding Status of U.S. Pension Plans Declines Over 13 Percentage Points, According to BNY Mellon Asset Management
December 09 2008 - 8:33AM
PR Newswire (US)
Falling Interest Rates Drive Pension Plan Liabilities Up 10.2
Percentage Points PITTSBURGH, Dec. 9 /PRNewswire-FirstCall/ --
Funding ratios at the typical U.S. corporate pension plan fell 13.4
percentage points in November, the worst monthly performance since
the stock market crash of 1987, as declining interest rates sent
liabilities soaring by 10.2 percentage points, according to BNY
Mellon Asset Management. Asset returns in a moderate risk portfolio
(60 percent equities, 40 percent bonds) lost an additional 3.2
percentage points as global equity markets continued their decline.
For the year to date, funding ratios for typical plans have
declined nearly 20 percentage points. "Pension plans have seen
their equity investments fall by more than 40 percent over the
course of the year," said Peter Austin, executive director of BNY
Mellon Pension Services. "Now in November, the drop in high-grade
corporate yields has produced a steep increase in liability
values." "We remain very concerned about the impact of narrowing
corporate spreads on pension plan funding," Austin noted. "The
increase in liabilities in November was caused by a shift in the
corporate yield curve, not a narrowing of corporate spreads, which
remain at all-time highs. When corporate spreads narrow, there is a
strong likelihood that plan liabilities will increase. Plan
sponsors need to be aware of the specific risks that a narrowing of
spreads creates for their plan. The good news is that many of these
risks can be managed through liability driven investing and other
strategies." The Bank of New York Mellon Corporation is a global
financial services company focused on helping clients manage and
service their financial assets, operating in 34 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, clearing
services and treasury services through a worldwide client-focused
team. It has $22.4 trillion in assets under custody and
administration, approximately $1.1 trillion in assets under
management and services $12 trillion in outstanding debt.
Additional information is available at bnymellon.com. DATASOURCE:
The Bank of New York Mellon Corporation CONTACT: Mike Dunn,
+1-212-922-7859, Web Site: http://www.bnymellon.com/
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