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Funding Status of U.S. Pensions Falls to 74.0 Percent in June, According to BNY Mellon Asset Management

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2010-07-13 05:31:22     
BNY Mellon

A combination of U.S. stock market declines and lower interest rates in June resulted in the lowest-funded status for the typical U.S. corporate pension plan since February 2009, according to monthly statistics published by BNY Mellon Asset Management.

The funded status in June declined 6.0 percentage points to 74.0 percent. Through the end of June, the funded status of the typical U.S. corporate plan is down 9.5 percentage points for the year.

The falling stock markets resulted in a decline of 2.3 percent in assets at the typical U.S. corporate plan, while liabilities sharply increased in June, rising 5.6 percent, as reported by the BNY Mellon Pension Summary Report for June 2010. Plan liabilities are calculated using the yields of long-term investment grade corporate bonds. Lower yields on these bonds result in higher liabilities.

"Investors' fears sent U.S. stocks down 5.7 percent in June, which followed the 7.9 percent fall in May," said Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management. "The second quarter decline of 11.3 percent in U.S. stocks was the worst quarterly performance since the fourth quarter of 2008."

The June rally in Treasuries led to a 39-basis-point drop in the Aa corporate discount rate to 5.34 percent, the lowest point since June 2005, according to BNY Mellon Asset Management.

"Pension plans experienced pressure from both the asset and liability side in June, and there doesn't appear to be a quick fix on the horizon," said Austin. "Poor asset returns and dropping interest rates are prompting both corporate and public sector plans to consider more active approaches to managing their funding strategies. Interest in Liability-Driven Investing (LDI) strategies remains high, with many sponsors adding objectives such as deadlines to reach specific target funding levels."

Notes to Editors:

BNY Mellon Asset Management is the umbrella organization for BNY Mellon's affiliated investment management firms and global distribution companies.

BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 34 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has $22.4 trillion in assets under custody and administration, $1.1 trillion in assets under management, services $11.8 trillion in outstanding debt and processes global payments averaging $1.5 trillion per day. Additional information is available at www.bnymellon.com.

All information source BNY Mellon Asset Management as of March 31, 2010. 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)

Specialized in: Bny Mellon - Bank Of New York - Mellon - Pittsburgh - Global
URL: http://www.bnymellon.com/
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