Strong Stock Performance Boosts Pension Funding in July

August 5, 2010 ( - Strong performances by stocks around the world drove the assets of the typical U.S. corporate pension plan higher in July, according to monthly statistics published by BNY Mellon Asset Management.

The funded status of U.S. pensions increased 2.9 percentage points to 76.9%, BNY Mellon said in a press release. However, Peter Austin, executive director of BNY Mellon Pension Services, noted in the announcement that the funded status for the typical plan is still 6.6 percentage points lower than it was at the beginning of 2010.  

U.S. stocks rose 6.9% and international stocks returned 9.5%, mostly due to the strengthening euro, which resulted in an increase of 4.8% for the value of the assets in plans in July, according to the BNY Mellon Pension Summary Report for July 2010.  The report also notes that corporate spreads in July tightened slightly, which lowered the Aa corporate discount rate to 5.29% from 5.34%, sending liabilities for the typical corporate pension plan up 0.9% for the month.

“Corporate plans continue to express interest in taking a more active approach to limit their exposure to wide swings in interest rates and portfolio returns.   In particular, we are seeing plans build on their liability driven investing (LDI) strategies by setting deadlines to reach targeted funding levels,” Austin said.