Plans Remain in Positive Territory for the Year
BOSTON, May 9, 2012 — The funded status of the typical U.S. corporate pension plan in April fell 3.5 percentage points to 76.3 percent, the first time this percentage has declined in 2012, according to BNY Mellon Asset Management.
The drop was due to a 4.5 percent rise in liabilities, resulting from falling interest rates, and a decline in the equity markets, according to the BNY Mellon Pension Summary Report for April 2012. BNY Mellon attributed the increase in liabilities to the 29-basis-point drop in the Aa corporate discount rate to 4.29 percent. The decline in the equity markets was the primary reason for the 0.1 percent drop in plan assets during the month, BNY Mellon said.
Plan liabilities are calculated using the yields of long-term investment grade corporate bonds. Lower yields on these bonds result in higher liabilities.
The funded status of the typical corporate plans remains positive for the year so far, having gained 3.9 percentage points, primarily as a result of the strong equities performance in the first quarter of 2012, BNY Mellon said.
"Concerns about a slowing economy in the U.S. and the ability of Europe to rebound resulted in increased pessimism in April," said Jeffrey B. Saef, managing director, BNY Mellon Asset Management, and head of the BNY Mellon Investment Strategy & Solutions Group (a division of The Bank of New York Mellon). "If plan sponsors become pessimistic about the outlook for equities, we could see further acceleration in the trend toward hedging against interest rate moves."
BNY Mellon Asset Management is one of the world's leading asset management organizations, encompassing BNY Mellon's affiliated investment management firms and global distribution companies. Information about BNY Mellon Asset Management can be found at www.bnymellonam.com.
BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $26.6 trillion in assets under custody and administration and $1.3 trillion in assets under management, services $11.9 trillion in outstanding debt and processes global payments averaging $1.4 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com or follow us on Twitter@BNYMellon.