April Improvement Continues Eight-Month Upward Trend
BOSTON, May 5, 2011 — The funded status of the typical U.S. corporate pension plan in April rose 0.7 percentage points to 89.2 percent, the eighth consecutive month of improvement, according to monthly statistics published by BNY Mellon Asset Management.
The funding ratio for the typical corporate plan has improved 4.9 percentage points since the beginning of the year, according to the BNY Mellon Pension Summary Report for April 2011.
Rising stock markets in the U.S. and around the world lifted assets for the typical corporate pension plan in April by 2.6 percent, outpacing the 1.8 percent rise in liabilities, according to the report. The report attributed the liability increase to the decline in the Aa corporate discount rate to 5.50 percent from 5.61 percent.
Plan liabilities are calculated using the yields of long-term investment grade corporate bonds. Lower yields on these bonds result in higher liabilities.
"Plan sponsors are becoming increasingly optimistic as funding levels improve, putting them in a better position to make strategic decisions about current and future asset allocations," said Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management.
"An increasing number of plan sponsors are evaluating their prospects to further improve their funded status through return-seeking assets, such as alternatives and equities," he added. "However, they are maintaining a clear focus on preserving the funding gains that have been captured over the last eight months. The question most frequently asked is whether now is the time to increase the liability hedge given interest rate trends. "
BNY Mellon Asset Management is the umbrella organization for BNY Mellon's affiliated investment management firms and global distribution companies.
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 $25.5 trillion in assets under custody and administration and $1.2 trillion in assets under management, services $11.9 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.
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