Milliman year-end analysis: Investment losses and stagnant discount rates in Q4 derail stellar year for corporate pensions, but overall funding still improves for 2018
Assets underperformed expectations in 2018 with a cumulative investment loss of 2.77% (by comparison, the 2018 Pension Funding Study reported that the monthly median expected investment return was 0.55%, or 6.8% annualized). In December, the Milliman 100 PFI experienced its worst funding month of the year, with a
"The fourth quarter's asset losses and stagnant discount rates derailed what had started out as an optimistic year for corporate pensions," said Zorast Wadia, co-author of the Milliman 100 PFI. "Looking ahead to 2019, with those asset losses and in spite of the discount rate improvement, we're likely to see pension expense increase in the coming year. Milliman's upcoming 2019 Pension Funding Study will provide more specific details around what's expected."
Looking forward, under an optimistic forecast with rising interest rates (reaching 4.79% by the end of 2019 and 5.39% by the end of 2020) and asset gains (10.8% annual returns), the funded ratio would climb to 104% by the end of 2019 and 120% by the end of 2020. Under a pessimistic forecast (3.59% discount rate at the end of 2019 and 2.99% by the end of 2020 and 2.8% annual returns), the funded ratio would decline to 83% by the end of 2019 and 77% by the end of 2020.
To view the complete Pension Funding Index, go to http://us.milliman.com/PFI. To see the 2018 Milliman Pension Funding Study, go to http://us.milliman.com/PFS/. 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 18 years, Milliman has conducted an annual study of the 100 largest defined benefit pension plans sponsored by
SOURCE
Carson Group Adds Retirement Planning Expert, Jamie Hopkins, to Lead Retirement Research and Investor and Advisor Retirement Education
CICA Announces Top Three Essay Contest Finalist Teams
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News