US - Funding ratios in the typical US corporate pension plan fell 3.7% in October as stocks had their worst month since 1987, according to BNY Mellon Asset Management.
Peter Austin, executive director of BNY Mellon Pension Services, said: "Renewed recession fears weakened an already fragile market, as the value of the assets in a moderate-risk portfolio declined 11.8% in October.
"The impact of this dramatic drop in asset values was partially offset by a 7.3% drop in typical plan liabilities, as the Pension Protection Act average discount rates rose 76 basis points."
Austin added that was the largest decline in funded status for a single month since BNY started tracking pension funding in March 2005.
He explained the equities' rally in October contributed to improve the funding ratios, which could have otherwise been much worse.
In addition, he said: "We are watching corporate spreads very closely as they remain near all-time levels. It is inevitable that corporate spreads will narrow."
He concluded: "The critical question is whether equity values will keep pace with the expected increase in plan liabilities. Plan sponsors need to be vigilant in monitoring their pension funding as we expect more volatility in the near term."
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