Pension Funding Ratios up 11% in Q4 2010

January 4, 2011 ( - Legal & General Investment Management America’s Pension Fiscal Fitness Monitor indicates that pension funding ratios increased11% in the fourth quarter of 2010.

This follows a 2% rise in funding ratios during the third quarter of 2010.  Funding ratios were down about 1% for the one-year period ending December 31, 2010.  

According to a press release, the Pension Fiscal Fitness Monitor shows the increase in funding ratios came from a combination of equity market gains and a decrease in liabilities as bond yields rose significantly.   Equity markets rallied – the S&P was up nearly 11% – leading the average pension investment strategy to an increase of 7% for the quarter.  At the same time, bond yields rose resulting in pension discount rates rising 30 basis points from 5.3% to 5.6%, decreasing the present value of a typical pension liability profile by approximately 4%.  

LGIMA’s Head of US Pension Solutions, Aaron Meder said in the announcement: “The 11% increase in funding ratios marks the largest quarter over quarter change since the inception of the Pension Fiscal Fitness Monitor time-series, dating back over 15 years.  We estimate, on average, the U.S. corporate plan funding status is approaching 90%.”