The optimal combination of high corporate bond yields and budding investment returns for defined benefit plans was not evident in this year’s third quarter, as pensions’ worldwide saw an “offset of strong investment returns” due to the decline in yields, Towers Watson said Tuesday.
Through the financial services company’s quarterly published study: The Global Pension Finance Watch, the New York-based firm reported about market performance and its affects on defined benefit pension plans located in the U.S., the U.K., Brazil, Canada, Europe and Japan.
Overall, asset values improved during the period thanks to global equity and bond market surges; however, this performance was countered by the “continuing downward trend in corporate bond yields, which drove up pension liabilities,” the Nov. 16 released report stated.
“The net result varied by market, with three markets showing increases in pension index and three showing decreases over the quarter,” the report said. For the year, pension indexes are lower in every market, Towers Watson explained.
Furthermore, investment returns were the highest in the U.K., the U.S., and Canada, where postings reached 9.2%, 8.3%, and 7.4%, respectively. The remaining regions reported out less than 5% in returns, with Japan being the only country that did not have positive returns for the year.
Additionally, with regards to liabilities, significant declines were seen in Japan (2.5%), the U.S (3.7%). and the U.K. (5.8%). However, this temporary drop for the quarter is not seen for the entire fiscal year.
“Although the downward trend reversed to some extent during September,” the report stated, “liability values are up significantly for both the quarter and the year to date.”
Currently, Towers Watson utilizes nearly 14,000 associates to assist its clients with “employee benefits, talent management, rewards, and risk and capital management,” the press release said.