US - The aggregate deficit of S&P 1500 pension plans increased by $74bn in July, new figures from Mercer show.
The deficit rose from $231bn as of June 31, 2011 to $305bn as of July 31. The deficit corresponds to an aggregate funded ratio of 83% as of July 30, compared to a funded ratio of 86% at June 30. Figures show the S&P 1500 funded status peaked at 88% at the end of April 2011, declining by 5% since.
The recent decline was caused by a 2% drop in equities, partly offset by a fall in yields on high quality corporate bonds during July. Meanwhile, discount rates for the typical US pension plan decreased approximately 30 basis points during the month, Mercer added.
Mercer's retirement risk and finance group partner Jonathan Barry said: "I think the market's concern around the US debt ceiling debate really showed up in this month's numbers. The S&P 1500 declined by roughly 4% in the last week of the month, and high quality bond yields declined, as investors looked for safer investments due to the uncertainty. We saw pretty steady improvement in funded status through the first few months of 2011, but we have seen more volatility the past three months, which has wiped out much of the improvement we saw in funded status year to date.
"We continue to recommend that plan sponsors, especially those with closed or frozen plans look into frequent funded status monitoring, in order to capitalise on funded status improvements, and move to lower risk positions," he added.
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