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The median asset return for 2011 was 2.9%, down from 12.1% in 2010 and 18.5% in 2009. Meanwhile, the median pension liability grew by 13.7% in 2011, the third consecutive year with liability growth in excess of 10%. The high liability rate of growth is driven by decreasing interest rates. As of June 30, 2012, asset returns have declined even more, in part driven by the uncertain economic outlook, the European sovereign debt crisis and downgrades of credit ratings of several major global financial institutions. “The prevalence of ‘risky’ plans among S&P 1500 companies increased from 4.7% during 2010 to 7.1% during 2011, an increase of nearly 70%,” said Veletzos. “These plans are poorly funded and more material compared to the size of the corporations, so pension risk is a major issue for these organizations.” “We have also seen a continued decline in sponsors’ expectations of asset returns for the future,” he continued. “The median expected return declined from 7.92% to 7.73% at year-end 2011, likely due to a gradual movement away from higher risk assets, such as equities, combined with lower expectations of future market returns.” The report is available at www.mercer.com/retirementbenchmarking.
The median asset return for 2011 was 2.9%, down from 12.1% in 2010 and 18.5% in 2009. Meanwhile, the median pension liability grew by 13.7% in 2011, the third consecutive year with liability growth in excess of 10%. The high liability rate of growth is driven by decreasing interest rates.
As of June 30, 2012, asset returns have declined even more, in part driven by the uncertain economic outlook, the European sovereign debt crisis and downgrades of credit ratings of several major global financial institutions.
“The prevalence of ‘risky’ plans among S&P 1500 companies increased from 4.7% during 2010 to 7.1% during 2011, an increase of nearly 70%,” said Veletzos. “These plans are poorly funded and more material compared to the size of the corporations, so pension risk is a major issue for these organizations.”
“We have also seen a continued decline in sponsors’ expectations of asset returns for the future,” he continued. “The median expected return declined from 7.92% to 7.73% at year-end 2011, likely due to a gradual movement away from higher risk assets, such as equities, combined with lower expectations of future market returns.”
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