US - Corporate pensions plans had a bumper year in 2006 as assets and investment returns went up and the value of liabilities decreased, claimed a report issued by Wilshire Consulting.
The report stated that the aggregate funding ratio (assets divided by liabilities) for all plans combined increased from 93% to 101%, and an average US$83.5bn deficit at the beginning of the year changed to an average $16.6bn surplus last year.
It showed defined benefit pension assets for S&P 500 companies grew $132.5bn to $1.2trn, while liabilities increased $32.3bn to $1.2trn.
Even though 71% of corporate pension plans are still underfunded, that figure is down compared to the 83% of plans which were underfunded in 2005. The median (50th percentile) corporate funding ratio is 91%, which is an improvement from 2005's 85%.
Wilshire Associates senior managing director and head of Wilshire Consulting Julia Bonafede said: "A fourth consecutive year of positive equity returns contributed to the increase in pension assets, the median 2006 investment return was 11.5%, up from 8.5% in 2005.
"Additionally, S&P 500 companies contributed $36.3bn into their defined benefit plans in 2006, which was less than the $46.3bn contributed in 2005."
Wilshire Associates managing director and head of the Investment Research Group of Wilshire Consulting Steven J. Foresti said that although the interest rates used to discount future benefits rose and lowered the present value of liabilities, liabilities overall increased.
Foresti said: “The median discount rate used to value pension liabilities rose from 5.62% to 5.75%, while total liabilities increased 2.7% for the year."
A new criminal offence of neglecting pension responsibilities will be announced in a pensions white paper this week, the prime minister has confirmed.
Despite improvements in investment manager attitudes towards responsible investment, research reveals there is a way to go before the majority deliver meaningful action. Victoria Ticha explores why
The Co-operative Bank is set to continue de-risking pension schemes after it mitigated further losses by switching from the retail prices index (RPI) to the consumer prices index (CPI).
A model aimed at reducing climate change-related financial risk exposure from corporate credit assets has been launched by Insight Investment.