A new study from Aon Hewitt claims that pension funds for companies located in the U.S., the U.K., Canada and Europe clocked out of 2010 with a 87% funded status, marking a 1% increase from previous numbers.
The analysis, which tracks global companies in the S&P 500, FTSE 350, DJ Euro Stoxx 50 and TSX through the Illinois-based firm’s pension risk tracker tool, reported that global pension assets increased by 8%, and liabilities increased by 7% during the period.
Cecil Hemingway, global retirement practice leader at Aon Hewitt, highlighted in the Friday study that the incremental improvements are not enough to allow company CFOs to rest easily because of recent volatility.
Risk management programs that would “combine de-risking plan investments with strategic funding” could possibly be a future tool that organizations will utilize to hem pension deficits, Ari Jacobs, Aon Hewitt's Retirement Solutions leader, said in the Jan. 14 announcement.
In October, the firm explained that pension plans were situated at about 80% for Q3 following a nightmarish August. Pension assets grew by 12%, but liabilities increased by 10%, the study said at the time.
Furthermore, specific regional coverage this month included an 88% funded status for U.S. companies thanks to equity returns from 5% to 15% in the fourth quarter. The 30-50 basis point recovery in the corporate bond rate also didn’t hurt the surge at the end of the year, Aon Hewitt said.
“Despite troughs in funded status not seen since the heart of the financial crisis and sub-five percent discount rates, 2010 will be looked back upon as a year for plan sponsors to adjust their strategies and gear up for action in 2011 and beyond,” Joe McDonald, Aon Hewitt's global risk services leader in the U.S., explained in the statement.
Alternately, U.K.-based companies’ pension funds saw their funding ratios increase from about 85% to 91%, and Canadian corporates also sky rocketed from 88% to 94%, the human capital consulting and outsourcing solutions business for the Chicago-based Aon Corporation explained in its recap.
Continental Europe pension plans dropped down from 75% to 71% due to significant volatility in asset markets and bond sectors, however.