BNY Mellon Sees Lowest Pension Funding Since Start of Data Tracking

September 8, 2010 ( - Slumping stock markets and a decline in the discount rate for Aa corporate bonds in August combined to send the funded status of the typical U.S. corporate pension plan down 5.6 percentage points to 71.3%, according to BNY Mellon Asset Management.
A press release said this is the lowest funding level since BNY Mellon began tracking this data in 2006.

For the month of August, assets for the typical plan fell 2.1% while liabilities increased 5.5%, BNY Mellon data showed.

Weakening consumer confidence and concerns over a slowing economic recovery contributed to a 4.7% fall in U.S. equities, with international stocks dropping 3.1%.  The Aa corporate discount rate fell from 5.29% at the end of July to 4.92% at the end of August, its lowest level in at least 30 years, BNY Mellon said.

“August was one of the worst months of 2010 for corporate pension plans as they were hit by sharply rising liabilities as well as declining assets,” said Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management, in the announcement. “While corporate spreads increased, the dramatic decline in Treasury yields, reflecting a flight to quality, pushed nominal corporate interest rates to historic levels.  Since March, pension funds have had little to cheer about, as the funded status for the typical corporate plan has fallen more than 14 percentage points.”