UBS New Tracker Finds 2006 Pension Improvement

A news release said that the first index reading found that a typical pension fund that started the year with a funding ratio of approximately 90% closed the year with a funding ratio of nearly 103%.

The announcement said the UBS US Pension Fund Fitness Tracker will be a quarterly reading of the overall health of the typicalU.S. defined benefit pension plan.The improved health of the typicalU.S. defined benefit pension plan is due largely to the year’s strong equity market returns, according to Aaron Meder, UBS Global Asset Management’s Head of Asset Liability Investment Solutions in the Americas.

UBS said it estimates that the typical large corporate defined benefit plan saw an increase in assets for the year of almost 14%, while liabilities were roughly flat for the year, measured by the iBoxx US Pension Liability indices.

However, while the overall numbers were positive for the year, the UBS index pointed out “an area of concern” for pension managers – significant funding ratio volatility due to interest rate swings and plans’ overreliance on equity market risk.

“Plans can implement liability-driven strategies that significantly reduce the uncertainty in their future pension contributions – often without reducing expected plan returns. This improvement in overall pension health provides many with an excellent opportunity to do so,” said Meder, in the news release.

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