Asset AllocationDecember 12, 2019

S&P Aggregate Pension Funded Status Rose in November

Level rises to 85.8% for corporate plan funding, Aon says.

Reported by Steffan Navedo-Perez

Thanks to a late-month push, the S&P aggregate pension funded status increased slightly in November, from 85.1% to 85.8%, according to a new report from Aon detailing the funding ratios from defined benefit plans originating from S&P 500 companies.

“Positive asset returns in November helped improve pension funded status getting us close to the levels we were at the beginning of the year – this has been the story all year long as strong asset performance across many asset classes has offset lower discount rates,” said Ari Jacobs, senior partner and global retirement solutions leader at Aon.

Things weren’t looking so bright in the early weeks of the month, but pension asset returns rebounded after being in negative territory, ending the month with a 1.2% return.

The amount fails to recoup some losses in the cumulative 2019 calculation. Aon measured $239 billion in liability increases in 2019 year-to-date, offset only partially by $200 billion in asset increases year-to-date , leaving pensions with a $39 billion deficit. The aggregate funded ratio for pension plans in the S&P 500 decreased overall from 86.0% to 85.8%.

Milliman recently reported similar gains for the 100 largest corporate plans, whose funding ratios increased to 86.8% from 86.1% in November. “Market performance in 2019 has been better than expected for corporate pensions, helping counteract the effect of the low discount rate environment on funding,” Zorast Wadia, lead author of the Milliman 100 PFI, said in a statement.

The gap between expected or promised Lifetime Financial Security (LFS) benefits and what can likely be provided will hit nearly $16 trillion among 21 countries by 2050, according to a report from Group of Thirty, an international think tank of financiers and academics.

The funded level for state and local plans, namely the ratio of assets to liabilities, rose slightly in fiscal 2018, to 72.8% from 72.1% the year before, according to the Center for Retirement Research at Boston College.