Funded Status of U.S. Corporate Pensions Rises to 89.5 Percent in June, According to BNY Mellon ISSG
Highest Level in Two Years
NEW YORK, July 2, 2013 /PRNewswire/ -- The funded status of the typical U.S. corporate pension plan increased 3.1 percentage points in June 2013 to 89.5 percent, the highest level since June 2011, when it was 91.4 percent, according to the BNY Mellon Investment Strategy & Solutions Group (ISSG). Year to date, the funded ratio is up 13.2 percentage points, ISSG said.
The improvement was driven for the second month in a row by a jump in the Aa corporate discount rate, which drove liabilities sharply lower, according to the BNY Mellon Pension Summary Report for June 2013. Liabilities for the typical corporate plan fell 5.0 percent as the discount rate on the Aa corporate bonds increased 39 basis points to 4.69 percent, the report said. Plan liabilities are calculated using the yields of long-term investment grade bonds. Higher yields on these bonds result in lower liabilities.
Assets for the typical corporate plan fell 1.6 percent as U.S. equity markets had their first losing month in 2013, the report said.
"Investors are growing more confident that the U.S. Federal Reserve is getting ready to taper its easing policies, and this is resulting in higher interest rates, which benefits plans," said Jeffrey B. Saef, managing director, BNY Mellon Investment Management, and head of the ISSG. "While assets fell slightly in June, the big decline in liabilities more than compensated for the fall in equity values, leading to the improvement in funded status."
Saef added that many pension plans view a funded status of 90 percent as a threshold for shifting a portion of their equities into liability-matching assets. "With the funded status at over 89 percent and yields rising, we would not be surprised to see a growing number of companies moving assets into longer term corporate bonds."
Notes to Editors:
The BNY Mellon Investment Strategy and Solutions Group is a division of The Bank of New York Mellon.
BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.4 trillion in assets under management. It encompasses BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies. More information can be found at www.bnymellon.com.
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 36 countries and more than 100 markets. As of March 31, 2013, BNY Mellon had $26.3 trillion in assets under custody and/or administration, and $1.4 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. 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.
All information source BNY Mellon as of March 31, 2013. 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 Investment 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.
SOURCE BNY Mellon
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