Broader Effect for Pensions’ Lackluster Performance

By ASPPA Net Staff • October 15, 2015 • 0 Comments
The recent rough patch corporate pensions have had may have broader implications. Recent reports further buttress earlier analyses showing that corporate sector pensions took a hit due to investment losses in August and September.

The $28 billion in corporate pension plan losses and $9 billion increases in liabilities in September translated to funded ratios below those of the same month one year before, according to a report by Milliman cited by Chief Investment Officer. The funded ratio this September was 81.7%, down from 83.6% in September 2014. CIO reported similar data from Willshire Consulting and BNY Mellon — respective corporate pension plan funding levels of 81.3% and 81.8%.

And not only did August and September bring bad news for corporate pensions, so did the entire third quarter. The Milliman report says that defined benefit plans lost $51 billion in the third quarter, amounting to a 2.5% quarterly investment loss — which it says marks the biggest third quarter loss since 2011 for corporate pension plans.

The report further says that the hits that corporate pensions took in August and September mean more than a temporary drop — they mean that the projected 2015 returns for corporate pensions likely will not reach the anticipated 7.3%.

Wall Street’s performance in September meant more than reduced investment returns for pension plans — it also spelled a drop in the amount of defined contribution plan money allocated to equities, according to Aon Hewitt. The Aon Hewitt 401(k) Index says that DC plan participants’ overall allocation to equities fell to 64.6% in September. It also reports that fixed income funds were the winners in September and that they were the asset class that grew in that month.