Corporate pensions heading for “full funding” in May, at 98.8% funded
SEATTLE, June 4, 2021 / PRNewswire / – Milliman, Inc., a leading global actuarial and consulting firm, today released the results of its latest Milliman 100 Pension Funding Index (PFI), which analyzes the 100 largest pension plans corporate pension plans.
During the month of May, the market value of PFI plan assets improved by $ 16 billion thanks to a strong capital gain of 1.24%. The gains were however offset by an increase in liabilities due to a 4 basis point decrease in the monthly discount rate, from 2.98% to 2.94% as of May 31st. Overall, the financing of corporate pensions has improved by 8 billion dollars for the month, and the capitalization ratio fell from 98.4% at the end of April to 98.8% May 31st.
“Discount rates have only exceeded 3.00% once in the past twelve months, in March,” said Zorast Wadia, author of the Milliman 100 PFI. “While the investment gains have allowed these pensions to crawl towards ‘full funding’, an increase in the monthly discount rate could very well place them above.”
Ultimately, as part of an optimistic forecast with rising interest rates (reaching 3.29% by the end of 2021 and 3.89% by the end of 2022) and asset gains (10, 2% annual return), the capitalization ratio would climb to 108% by the end of 2021 and 125% by the end of 2022. In a pessimistic forecast (discount rate of 2.59% at the end of 2021 and 1 , 99% at the end of 2022 and annual returns of 2.2%), the capitalization ratio would fall to 94% by the end of 2021 and 85% by the end of 2022.
To view the full pension capitalization index, go to www.milliman.com/pfi. To consult the Milliman 2021 study on pension funding, go to www.milliman.com/pfs. To receive regular updates on Milliman’s pension funding analysis, contact us at [email protected].
Milliman is one of the world’s largest providers of actuarial and related products and services. The firm has consulting practices in the areas of health, property and casualty insurance, life insurance and financial services, and employee benefits. Founded in 1947, Milliman is an independent firm with offices in major cities around the world. For more information, visit milliman.com.
SOURCE Milliman, Inc.