Funding Status of U.S. Pensions Holds Steady in July, According to BNY Mellon Asset Management
August 05 2009 - 10:03AM
PR Newswire (US)
July's Stock Market Euphoria Does Not Translate into Gains for
Funding Status BOSTON, Aug. 5 /PRNewswire-FirstCall/ -- Assets and
liabilities for the typical moderate risk U.S. corporate pension
plan both rose 5.4 percent in July, according to monthly statistics
published by BNY Mellon Asset Management. This resulted in the
funded status of the typical plan holding steady at 79.2 percent
for the month. For the year, through July 31, 2009, the funding
ratio for the typical plan is now up 5.3 percentage points from
73.9 percent at December 31, 2008, as represented by the BNY Mellon
Pension Liability Index. "July's stock market euphoria has not
translated into pension funded status gains," said Peter Austin,
executive director of BNY Mellon Pension Services, the pension
services arm of BNY Mellon Asset Management. "While U.S. stocks
returned nearly eight percent and international stocks were up more
than nine percent in July, these big gains were only enough to
offset the rise in liabilities that plans face. This rise in
liabilities was due to the decline in the discount rate on Aa
corporate bonds to 5.88 percent from 6.28 percent at the end of
June." Plan liabilities are calculated using the discount rate of
long-term investment grade corporate bonds. Lower yields on these
bonds result in higher liabilities. "Pension plan managers now must
weigh the options of positioning their portfolio for further gains
in the equity markets against adopting a defensive posture to
protect against a rise in liabilities," said Austin. "A majority of
corporate pension plans continue to be under funded. A continuing
equity rally would lower the contributions that companies would
need to make to their pension plans to achieve full funding.
However, declining stock markets or a further drop in bond yields
would put increasing pressure on the plans." Notes to Editors: BNY
Mellon Asset Management is the umbrella organization for The Bank
of New York Mellon Corporation's affiliated investment management
firms and global distribution companies. 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 $20.7 trillion in
assets under custody and administration, $926 billion in assets
under management, services $11.8 trillion in outstanding debt and
processes global payments averaging $1.8 trillion per day.
Additional information is available at http://www.bnymellon.com/.
All information source BNY Mellon Asset Management as at June 30,
2009, except where noted. This press release is issued by BNY
Mellon Asset Management to members of the financial press and media
and the information contained herein should not be construed as
investment advice. Past performance is not a guide to future
performance. A Bank of New York Mellon Company 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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