February 09, 2012

Funded Status of U.S. Pensions Rises to 74.1 Percent in January, According to BNY Mellon

Rising Stock Markets Contribute to Stronger Portfolios

BOSTON, February 9, 2012 — Rising equity markets in the U.S. and around the world contributed to a 1.7 percentage point increase in January in the funded status of the typical U.S. corporate pension plan, according to BNY Mellon Asset Management.  The strong start to the year from stocks drove the funded status of the typical plan to 74.1 percent, according to the BNY Mellon Pension Summary Report for January 2012.

Assets for the typical plan in January increased 3.4 percent, offsetting a 1.1 percent increase in liabilities, BNY Mellon said.  The rise in liabilities was due to tightening Aa corporate bond spreads, resulting in a six-basis-point decline in the Aa corporate discount rate to 4.30 percent, according to the report.

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

"The choppy recovery for pension plans continues, as the funded status has risen from the nadir of 70.1 percent at the end of September 2011," 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).  "This improvement has been largely due to the rally in equities, which has boosted asset values, as low interest rates have continued to prop up liabilities." 

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.