U.S. Pensions’ funded status dropped 12.7 percentage points over the full year 2011 to 72.4%, thanks to a sharp increase in liabilities that outpaced any rise in plan assets, according to BNY Mellon.

In its December Pension Summary Report, BNY Mellon said liabilities, which are calculated using yields of investment-grade corporate bonds (lower yields imply higher liabilities), rose 20% over the year. Meanwhile, assets increased about 2.7% for the typical plan in 2011.

In December alone, plan liabilities rose 4.6%, overshadowing a 0.8% rise in plan assets that resulted from a slight gain in U.S. equity markets.

“The continuing uncertainty regarding the prospects for a U.S. economic recovery and the ongoing European debt crisis drove investors back into bonds during December, which sent rates lower,” said Jeffrey B. Saef, managing director, BNY Mellon Asset Management. “We expect continuing volatility until investors believe the recovery in the U.S. is sustainable and some resolution is reached in Europe.”

Danielle Reed writes for Financial Planning.