April 03, 2012

Funded Status of U.S. Pensions Rises More than Three Percentage Points in March, According to BNY Mellon


Sixth Consecutive Month of Rising Stock Markets Boosts Funded Status to Nearly 80 Percent

BOSTON, April 3, 2012 — The best quarter for U.S. equity markets in a decade helped to drive the funded status of the typical U.S. corporate pension plan in March 3.6 percentage points higher to 79.8 percent, according to BNY Mellon Asset Management.  U.S. stocks have now risen for six consecutive months. 

The pension plans also benefited from an increase in the Aa corporate discount rate, which resulted in lower liabilities, according to the BNY Mellon Pension Summary Report for March 2012.  The funded status of the typical corporate plan has now increased 7.4 percentage points this year.

Assets for the typical corporate pension plan in March rose 1.3 percent, and liabilities fell 3.2 percent, BNY Mellon said.  The decrease in liabilities was due to the Aa corporate discount rate rising 25 basis points to 4.58 percent, according to the report.

Plan liabilities are calculated using the yields of long-term investment grade corporate bonds.  Higher yields on these bonds result in lower liabilities.

"Both the equity markets and interest rates moved in the right direction in March, helping moderate risk corporate pension plans approach a funding level of 80 percent," 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).  "Further improvements in the funded status could encourage plans to increase their hedge 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 $25.8 trillion in assets under custody and administration and $1.26 trillion in assets under management, services $11.8 trillion in outstanding debt and processes global payments averaging $1.5 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.