Thursday, November 20, 2008

Bad bad bad news for US pensions

On the expense side...

Assets of the 100 biggest US company pension plans, which account for 70% of defined benefit pension assets at corporations, fell by an estimated $120bn in October - the largest monthly loss in at least eight years. In 2008, PPA cash requirements were an estimated $32bn, which will likely rise to about $93bn in 2009.

On the funding status side...

If the spread between Treasuries and high-grade corporate bond yields hadn't more than doubled to 3.3 points over the past 12 months, the combined $60 billion surplus for S&P's 1,500 companies at the end of 2007 would now be a deficit of more than $400 billion. With the drop in liabilities due to a higher discount rate, however, the deficit as of Sept. 30 was only $35 billion.

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