Funding Status of U.S. Pension Plans Declines Over 11 Percentage Points in December, According to BNY Mellon Asset Management
January 07 2009 - 7:54AM
PR Newswire (US)
Typical Plan Saw Funded Status Decline More than 30 Percentage
Points in 2008 BOSTON, Jan. 7 /PRNewswire-FirstCall/ -- Funding
ratios at the typical U.S. corporate pension plan slid more than 11
percentage points in December, after falling more than 13
percentage points in November, according to BNY Mellon Asset
Management. The two double-digit declines resulted primarily from
falling rates of longer-term high grade corporate bonds. "The Fed's
drive to bring down interest rates to help the economy has had the
collateral effect of increasing the liabilities of typical U.S.
corporate pension plans," said Peter Austin, executive director of
BNY Mellon Pension Services. "Liabilities rose 20.3 percent in
December as corporate bond yields dropped by 125 basis points.
Small solace to plan sponsors was a year-end stock market rally
that boosted asset returns by 3.2 percent in December. The
combination of falling stocks and rising liabilities throughout
2008, reminiscent of the 'perfect storm' of 2001-2003, resulted in
one of the worst years in memory. For the typical U.S. corporate
plan, the funded status in 2008 fell 31.5 percentage points."
Looking ahead, Austin said, "Market sentiment is pointing toward an
increase in Treasury yields during 2009. We also see a continued
narrowing of corporate spreads, led by the demand of plan sponsors
to use long corporate bonds as a pension liability hedge. The
damage inflicted in 2008, combined with continued volatility in the
credit and equity markets, will require plan sponsors to carefully
monitor their plans and consider various scenarios as they review
their asset allocations and funding strategies. We are seeing plans
take a variety of approaches to manage their risks in the current
environment." 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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