A run-up in the markets is giving plan participants a reason to open their statements again. Pension funded ratios of the S&P 1500 pension plans have climbed 6% to close at 86%, according to a Mercer report. That represents 12% growth from year-end 2012. Aggregate pension deficits have been cut by more than half from the end of 2012 – down from $557 billion to $269 billion.
Much of this, besides the run-up in the markets, has to do with de-risking by plan sponsors, notes Jonathan Berry, Partner in Mercer’s Retirement Business. But de-risking can come in two forms. The first, he notes, has to do with holding onto assets and following a Liability Driven Investing (LDI) strategy – investments such as higher fixed income allocation or longer-term fixed income allocation so assets and liabilities can be working in line with one another.
