According to the report, the 0.8 percentage point increase follows assets falling less than liabilities last month. According to the BNY Mellon Pension Summary Report for May 2011, plan liabilities fell an average of 2.1%; the Aa corporate discount rate increased by 19 basis points, from 5.3% to 5.53%. Assets fell an average 1.1%, indicating declines in U.S. and global equities.
Plan liabilities are calculated using the yields of long-term investment grade corporate bonds, according to BNY. Higher yields on these bonds result in lower liabilities.
“The June results reversed some of the losses that pension funds sustained in May,” said Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management. “However, the volatility in equity returns in recent months reflects the fragility of the global markets. The risk of further deterioration in asset values complicates the decision-making of plan sponsors.”