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Pension Funds

Asset volatility raises NISA Pension Surplus Risk index

The NISA Pension Surplus Risk index rose 0.6 percentage points in December to 7.7%, the largest increase since November 2016 when the index rose to 9.3% from 8.7%.

During the month, the average funded status of the 97 tracked corporate pension plans fell to 87.1% from 91.6%.

The index's relatively sharp ascent was driven by the volatility of the asset component, which rose to 9.6% from 8.8% as the liability component rose a modest 10 basis points to 7.1%. Global equities experienced their worst month since 2010, as the S&P 500 and MSCI ACWI fell 9.2% and 7.2%, respectively. High-grade 10-year corporate bond yields fell about 6% during the month providing some offsetting support to rising asset volatility.

The Pension Surplus Risk index represents an expected rise or fall in assets given a one-standard deviation change in returns in a given year.