GLOBAL - Defined benefit (DB) pension plans worldwide failed to reap the benefits of strong year-end performance by equities in 2004, according to Towers Perrin.
Releasing the Towers Perrin Global Capital Market Update for the fourth quarter of 2004, the firm said major equity markets returned double-digit percentage gains for the year ending 31 December 2004.
But despite the strong returns, the funded position for benchmark plans in the UK and Japan improved by only 1% in 2004, while in the US and Canada, the funded position remained almost unchanged.
Australia and Brazil recorded the best results, with funded positions rising by 7% and 3.5% respectively.
“Multinational companies should continue to assess critically the ongoing earnings impact of the general decline in funded ratios, and the potential impact of different investment strategies on pension financing and future costs, at both a local and global level,” said Nigel Bateman, head of Towers Perrin’s global consulting group.
Towers said a combination of positive factors – falling oil prices, a decisive US Presidential election result, increasing corporate merger activity and healthy corporate earnings – led to the positive performance for pension plan equities.
Towers’ analysis examines the impact of changes in the stock and bond markets on a benchmark plan in each country, with liabilities estimated under international accounting standards and adjusted to reflect current interest rates and market conditions in each country.
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