September 07, 2011

Funded Status of U.S. Pensions Falls to 78.0 Percent in August, According to BNY Mellon


Liabilities Rise and Assets Fall for Second Month in Row

BOSTON, September 7, 2011 — The funded status of the typical U.S. corporate pension plan in August fell 5.6 percentage points to 78.0 percent as pension plans were affected by both falling assets and increasing liabilities for the second month in a row, according to monthly statistics published by BNY Mellon Asset Management.

The typical plan is now at its lowest funding level since September 2010, according to the BNY Mellon Pension Summary Report for August.

Assets for the typical plan fell 3.3 percent, reflecting declines in U.S. and global equities, according to BNY Mellon.   Liabilities rose 3.6 percent, as the Aa corporate discount rate decreased 23 basis points to 4.94 percent, the report said.  Plan liabilities are calculated using the yields of long-term investment grade corporate bonds.  Lower yields on these bonds result in higher liabilities.

"Growing concerns over the government's ability to stimulate the economy and deal with the deficit in the U.S. and the sovereign debt issues in Europe have both contributed to a tough situation for sponsors of U.S. corporate pension plans," said Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management.  "Growing pessimism about the ability to surmount these challenges in August led investors from equities to Treasuries and other asset classes believed to be less risky. Fortunately, spreads between corporate bonds and Treasuries widened by 35 basis points, saving plan sponsors from an even worse decline."

However, Austin noted that the extreme pessimism appears to have abated somewhat during the second half of August, as equities mounted a tepid recovery.  He said, "It remains to be seen whether concerns about the global economic malaise and the effectiveness of government policy will diminish sufficiently to allow the funded status of U.S. corporate pension plans to recover. Given the prospect of lower interest rates, recovery likely will need to come from asset returns."

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 $26.3 trillion in assets under custody and administration and $1.3 trillion in assets under management, services $11.8 trillion in outstanding debt and processes global payments averaging $1.7 trillion per day.  BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).  Additional information is available at www.bnymellon.com and through Twitter @bnymellon.

All information source BNY Mellon Asset Management as of June 30, 2011. This press release is qualified for issuance in the US only and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. 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 BNY Mellon Company(SM)