A monthly update highlighting key market indicators that are most relevant for pension plans
LGIMA estimates that pension funding ratios increased ~5.6% throughout August, with the impact primarily due to strong global equity performance and a higher discount rate. Our calculations indicate the discount rate’s Treasury component increased 24 basis points while the credit component widened 4 basis points, resulting in a net increase of 28 basis points.1 Overall, liabilities for the average plan decreased ~4.0%, while plan assets with a traditional “60/40” asset allocation2 increased by ~3.4%.2
Source: Bloomberg/Barclays and LGIMA as of August 31, 2020
1. Discount rates based on a blend of the Intercontinental Exchange US Pension Plan AAA-A and Intercontinental Exchange Mature US Pension Plan AAA-A discount curves
2. For the average plan LGIMA assumes a 60% allocation to MSCI AC World and a 40% allocation to Barclays Aggregate.