Milliman analysis: Corporate pensions see surprising $93 billion funding gain in March from massive discount rate surge
March's funding improvement was the direct result of a massive surge in the monthly discount rate, from 2.69% to 3.39%. The 70-basis-point increase was the fifth-largest ever recorded in the 20-year history of the PFI, with the last comparable increase happening in
"It's a stunning twist of fate that a month so turbulent as March – given the market conditions and the ongoing global pandemic – actually resulted in positive funding news for corporate pensions," said Zorast Wadia, author of the Milliman 100 PFI.
Looking forward, under an optimistic forecast with rising interest rates (reaching 3.84% by the end of 2020 and 4.44% by the end of 2021) and asset gains (10.6% annual returns), the funded ratio would climb to 96% by the end of 2020 and 112% by the end of 2021. Under a pessimistic forecast (2.94% discount rate by the end of 2020 and 2.34% by the end of 2021 and 2.6% annual returns), the funded ratio would decline to 81% by the end of 2020 and 74% by the end of 2021.
To view the complete Pension Funding Index, go to https://us.milliman.com/pfi. To see the 2019 Milliman Pension Funding Study, go to https://us.milliman.com/en/Insight/2019-Corporate-Pension-Funding-Study. To receive regular updates of Milliman's pension funding analysis, contact us at [email protected].
About Milliman
Milliman is among the world's largest providers of actuarial and related products and services. The firm has consulting practices in healthcare, property & 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 globe. For further information, visit milliman.com.
About the Milliman Pension Funding Study
For the past 19 years, Milliman has conducted an annual study of the 100 largest defined benefit pension plans sponsored by
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