Monday, April 7, 2008

Pension plan funding ratios decline precipitously

The funding ratio of a typical US pension scheme has fallen by nearly a quarter in the past nine months, suffering from a combination of volatile equity markets and declining interest rates.  Acording to the US Pension Fund Fitness Tracker from UBS Global Asset Management, in the first quarter of this year, the US pension funding ratio, or the estimated ratio of a typical scheme’s assets to its expected liabilities, declined by 11%.  UBS said in a statement that most of the drop occurred in January, whose 8% decline was the largest in a single month since 2002. It is the third consecutive quarter that the ratio has dropped. Since the middle of last year, it has gone from about 113% to 90%.  Furthermore, declining interest rates meant the present value of liabilities increased by nearly 8% in the quarter.

Source:  Financial News Online,

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