The funded ratio of corporate pension plans in the U.S., U.K., continental Europe and Canada dropped to an estimated 80% in the second quarter, down seven percentage points from the previous quarter, according to an analysis by Hewitt.
The global pension fund deficit increased to an estimated $500 billion during the quarter, from $300 billion.
Global pension assets fell by $91 billion, down from $1.979 trillion in the previous quarter, while liabilities increased by $106 billion, up from $2.28 trillion.
Companies in the S&P 500 experienced the largest drop in pension funding levels during the second quarter, down 10 percentage points (to 80%).
A 10% to 15% decline in equity markets and the lowest corporate bond rates in five years primarily drove the dip, according to Hewitt.
“The U.S. market was the biggest loser, if you will,” Joe McDonald, Hewitt's global risk services leader, said in a telephone interview. “Part of that is currency-related and the other part is the U.S. being the most exposed to pension risk.”
Assets of companies in the U.K.-based FTSE 350 index declined about 4% in the second quarter, while liabilities stayed flat. The average funded ratio dropped to 82%, down four percentage points for the quarter.
Corporate pension plans based in continental Europe experienced a six percentage point decline to 66% for the quarter.
Canada's corporate pension plans funded ratio declined to 95% during the quarter, down four percentage points from the previous quarter.
Mr. McDonald said corporate pension plans might be unlikely to begin lowering risk immediately because “short term, we see companies unwilling to lock in their losses.”
“The more those losses accumulate (the more) that trend is going to persist,” he said. “But they are eager to get away from the risks long term.”