Funding Status of U.S. Pensions Falls to 82.0 Percent in May, According to BNY Mellon Asset Management

Slumping stock markets drive assets down

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Jun 04, 2010, 08:19 ET

BOSTON, June 4 /PRNewswire-FirstCall/ -- Falling stock markets in May sent pension plan assets lower, resulting in the worst funded status for the typical U.S. corporate pension plan since October 2009, according to monthly statistics published by BNY Mellon Asset Management. The funded status in May declined 4.3 percentage points to 82.0 percent.

Through the end of May, the funded status of the typical U.S. corporate plan is down 3.5 percentage points for the year.

The falling stock markets resulted in a decline of 4.8 percent in assets at the typical U.S. corporate plan, while liabilities were little changed in May, rising 0.3 percent, as reported by the BNY Mellon Pension Summary Report for May 2010. Plan liabilities are calculated using the yields of long-term investment grade corporate bonds. Lower yields on these bonds result in higher liabilities.

"U.S. stocks in May had their worst month since February 2009, declining nearly eight percent, while a weakening euro helped to send international stocks down more than 11 percent, said Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management. "May's results wiped out equity gains on a year-to-date basis. Unfortunately, there was no relief on the liability side as the Aa corporate discount rate remained essentially flat despite a 30-basis-point widening of spreads to Treasuries."

Austin added, "The May 6 U.S. market flash crash reminds us that the equity markets remain very sensitive. Continuing fears over the European sovereign debt crisis and the fragility of the global economic recovery are likely to result in increased market volatility for the near term. In response to this expected volatility, we are hearing from a growing number of corporations that are seeking new solutions to manage financial risks posed by their pension plans. There appears to be growing interest for funding strategies that seek to establish deadlines to achieve and maintain specific funding levels, with the goal of providing a buffer against wide swings in either the equity markets or in interest rates."

Notes to Editors:

BNY Mellon Asset Management is the umbrella organization for BNY Mellon's affiliated investment management firms and global distribution companies.

BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 34 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has $22.4 trillion in assets under custody and administration, $1.1 trillion in assets under management, services $11.8 trillion in outstanding debt and processes global payments averaging $1.5 trillion per day. Additional information is available at www.bnymellon.com.

All information source BNY Mellon Asset Management as of March 31, 2010. This press release is qualified for issuance in the US only and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. This press release is issued by BNY Mellon Asset Management to members of the financial press and media and the information contained herein should not be construed as investment advice. Past performance is not a guide to future performance.

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