December 2022

US pension funding ratios decreased throughout December

LGIM America's Pension Solutions Monitor, which estimates the health of a typical US corporate defined benefit pension plan, estimates that pension funding ratios decreased through December 2022. Based on market movements, the average funding ratio is estimated to have decreased from 100.2% to 98.3%.

Equity markets had a weak month with Global Equities1 and the S&P 500 dropping 3.9% and 5.8%, respectively. Plan discount rates2 were estimated to have increased roughly 11 basis points over the month with the Treasury component increasing 15 basis points and the credit component tightening 4 basis points. Plan assets with a traditional “60/40” asset allocation decreased 2.5% while liabilities decreased by 0.6% resulting in a 1.9% decrease in funding ratios by December month-end. The impact of higher discount rates weighed on liability values; however, asset performance declined further over the month, resulting in the moderate decrease in funding ratios.

The Pension Solutions Monitor assumes a typical liability profile using an approximate duration of 12 years and 60% MSCI AC World Total Gross Index/40% Bloomberg US Aggregate Index (“60/40”) investment strategy, and incorporates data from LGIM America research, ICE indices and Bloomberg.


Pension funded status market summary:
  • Equity markets delivered weak performance with global equities down roughly 3.9%.
  • Plan liabilities decreased due to rising discount rates.
  • Funding ratio levels decreased as the underperformance in plan assets outweighed the drop in liabilities.

Funded status risk

Dec 2022


Interest rates

Credit spreads

Sources: LGIM America, ICE indices and Bloomberg. Data as of December 30, 2022.


1. “Global equities” referred to here is represented by the MSCI AC World Total Gross Index.
2. Discount rates based on a blend of the Intercontinental Exchange Mature US Pension Plan AAA-A and Intercontinental Exchange Retired US Pension Plan AAA-A discount curves.

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These results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results in an actual performance record, these results do not represent actual trading. Because these trades have not actually been executed, these results may have under‐ or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown.

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