The funded status of the average U.S. corporate pension plan dropped by 5.7 percentage points to 79.1% in June as falling yields on long Aa corporate bonds drove up liabilities, according to a news release from BNY Mellon Asset Management.
The assets of the average moderate risk portfolio increased 0.3% in June, while liabilities grew 7.6%. The BNY Mellon Pension Liability Index estimates the funding ratio for the average plan has increased 5.2 percentage points for the six months ended June 30.
“Rising stock markets improved the funded status of pension plans in March, April and May, but the rally slowed in June and was unable to keep up with the rise in liabilities,” said Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management. “The long-anticipated decline in long Aa corporate bond yields that began in March accelerated in June, finishing the month at 6.28% vs. 6.85% at the end of May. This was the largest one-month change since the 91 (basis point) increase in yields in January 2009.”