Pension Solutions Monitor

August 2024

US pension funding ratios increased throughout August

LGIM America's Pension Solutions Monitor, which estimates the health of a typical US corporate defined benefit pension plan, estimates that pension funding ratios increased slightly throughout August 2024. Based on market movements, the average funding ratio is estimated to have increased from 109.5% to 109.9%.

Equity markets experienced positive performance over the month with both Global Equities¹ increasing 2.6% and the S&P 500 increasing 2.4%. Plan discount rates² were estimated to have decreased 19 basis points over the month driven by the Treasury component falling 16 basis points and the credit component tightening 3 basis points. Plan assets with a traditional “50/50” asset allocation increased 2.3% while liabilities increased 1.9%, resulting in an increase to funding ratios by August month-end.

The Pension Solutions Monitor assumes a typical liability profile using an approximate duration of 12 years and 50% MSCI AC World Total Gross Index / 50% Bloomberg US Long Government/Credit Index. Our analysis incorporates data from LGIM America research, ICE indices and Bloomberg.³

Pension funded status market summary:

Equity markets delivered positive performance with Global Equities and the S&P 500 up over the month.
Plan liabilities increased over the month due to falling discount rates.
Funding ratio levels increased with the rise in assets outpacing the rise in liabilities.

Funded status risk	August 2024
Equities
Interest rates
Credit spreads

Sources: LGIM America, ICE indices and Bloomberg. Data as of August 30, 2024.

“Global equities” referred to here is represented by the MSCI AC World Total Gross Index.
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.
Prior to January 2023 the funded ratio of a typical US corporate defined benefit plan was calculated using an approximate duration of 12 years and a 60% MSCI AC World Total Gross Index / 40% Bloomberg US Aggregate Index (“60/40“) investment allocation strategy incorporating data from LGIM America research, ICE indices and Bloomberg. The change to a “50/50“ asset allocation reflects our understanding that most US corporate defined benefit plans have extended the duration of their fixed income as funded status has improved for the broader market. Furthermore, we believe that the duration of a typical plan's fixed income portfolio is better represented by the Bloomberg US Long Government/Credit Index compared to the Bloomberg US Aggregate Index.

For educational purposes only.

This material is intended to provide only general educational information and market commentary. Views and opinions expressed herein are as of the date set forth above and may change based on market and other conditions. The material contained here is confidential and intended for the person to whom it has been delivered and may not be reproduced or distributed. The material is for informational purposes only and is not intended as a solicitation to buy or sell any securities or other financial instrument or to provide any investment advice or service. Legal & General Investment Management America, Inc. does not guarantee the timeliness, sequence, accuracy or completeness of information included. Past performance should not be taken as an indication or guarantee of future performance and no representation, express or implied, is made regarding future performance.

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.

Unless otherwise stated, references herein to "LGIM", "we" and "us" are meant to capture the global conglomerate that includes Legal & General Investment Management Ltd. (a U.K. FCA authorized adviser), LGIM International Limited (a U.S. SEC registered investment adviser and U.K. FCA authorized adviser), Legal & General Investment Management America, Inc. (a U.S. SEC registered investment adviser) and Legal & General Investment Management Asia Limited (a Hong Kong SFC registered adviser). The LGIM Stewardship Team acts on behalf of all such locally authorized entities.

US pension funding ratios decreased throughout July

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 slightly throughout July 2024. Based on market movements, the average funding ratio is estimated to have decreased from 109.9% to 109.5%.

Equity markets experienced positive performance over the month with both Global Equities¹ increasing 1.6% and the S&P 500 increasing 1.2%. Plan discount rates² were estimated to have decreased 30 basis points over the month driven by the Treasury component falling 31 basis points and the credit component widening 1 basis point. Plan assets with a traditional “50/50” asset allocation increased 2.5% while liabilities increased 2.9%, resulting in a decrease to funding ratios by July month-end.

Pension funded status market summary:

Equity markets delivered positive performance with Global Equities and the S&P 500 up over the month.
Plan liabilities increased over the month due to falling discount rates.
Funding ratio levels decreased with the rise in liabilities outpacing the rise in assets.

	Funded status risk	July 2024
	Equities
	Interest rates
	Credit spreads
	Sources: LGIM America, ICE indices and Bloomberg. Data as of July 31, 2024.

“Global equities” referred to here is represented by the MSCI AC World Total Gross Index.
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.
Prior to January 2023 the funded ratio of a typical US corporate defined benefit plan was calculated using an approximate duration of 12 years and a 60% MSCI AC World Total Gross Index / 40% Bloomberg US Aggregate Index (“60/40“) investment allocation strategy incorporating data from LGIM America research, ICE indices and Bloomberg. The change to a “50/50“ asset allocation reflects our understanding that most US corporate defined benefit plans have extended the duration of their fixed income as funded status has improved for the broader market. Furthermore, we believe that the duration of a typical plan's fixed income portfolio is better represented by the Bloomberg US Long Government/Credit Index compared to the Bloomberg US Aggregate Index.

For educational purposes only.

US pension funding ratios increased throughout June

LGIM America's Pension Solutions Monitor, which estimates the health of a typical US corporate defined benefit pension plan, estimates that pension funding ratios increased throughout June 2024. Based on market movements, the average funding ratio is estimated to have increased from 108.8% to 109.9%.

Equity markets experienced strong performance over the month with both Global Equities¹ increasing 2.3% and the S&P 500 increasing 3.6%. Plan discount rates² were estimated to have decreased 17 basis points over the month, driven primarily from lower Treasury yields. Plan assets with a traditional “50/50” asset allocation increased 1.7% while liabilities increased 0.6%, resulting in an increase to funding ratios by June month-end.

Pension funded status market summary:

Equity markets delivered strong performance with Global Equities and the S&P 500 up over the month.
Plan liabilities modestly increased over the month due to falling discount rates.
Funding ratio levels increased with the rise in assets outpacing the rise in liabilities.

	Funded status risk	June 2024
	Equities
	Interest rates
	Credit spreads
	Sources: LGIM America, ICE indices and Bloomberg. Data as of June 30, 2024.

“Global equities” referred to here is represented by the MSCI AC World Total Gross Index.
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.
Prior to January 2023 the funded ratio of a typical US corporate defined benefit plan was calculated using an approximate duration of 12 years and a 60% MSCI AC World Total Gross Index / 40% Bloomberg US Aggregate Index (“60/40“) investment allocation strategy incorporating data from LGIM America research, ICE indices and Bloomberg. The change to a “50/50“ asset allocation reflects our understanding that most US corporate defined benefit plans have extended the duration of their fixed income as funded status has improved for the broader market. Furthermore, we believe that the duration of a typical plan's fixed income portfolio is better represented by the Bloomberg US Long Government/Credit Index compared to the Bloomberg US Aggregate Index.

US pension funding ratios increased throughout May

LGIM America's Pension Solutions Monitor, which estimates the health of a typical US corporate defined benefit pension plan, estimates that pension funding ratios increased throughout May 2024. Based on market movements, the average funding ratio is estimated to have increased from 107.6% to 108.8%.

Equity markets experienced strong performance over the month with both Global Equities¹ increasing 4.1% and the S&P 500 increasing 5.0%. Plan discount rates² were estimated to have decreased 20 basis points over the month with the Treasury component decreasing 18 basis points and the credit component tightening 2 basis points. Plan assets with a traditional “50/50” asset allocation increased 3.5% while liabilities increased 2.3%, resulting in an increase to funding ratios by May month-end.

Pension funded status market summary:

Equity markets delivered strong performance with Global Equities and the S&P 500 up over the month.
Plan liabilities modestly increased over the month due to falling discount rates.
Funding ratio levels increased with the rise in assets outpacing the rise in liabilities..

	Funded status risk	May 2024
	Equities
	Interest rates
	Credit spreads
	Sources: LGIM America, ICE indices and Bloomberg. Data as of May 31, 2024.

“Global equities” referred to here is represented by the MSCI AC World Total Gross Index.
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.

US pension funding ratios decreased throughout April

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 throughout April 2024. Based on market movements, the average funding ratio is estimated to have declined from 108.2% to 107.6%.

Equity markets experienced weak performance over the month with both Global Equities¹ decreasing 3.2% and the S&P 500 decreasing 4.1%. Plan discount rates² were estimated to have increased 45 basis points over the month with the Treasury component increasing 46 basis points and the credit component tightening 1 basis point. Plan assets with a traditional “50/50” asset allocation decreased 4.3% while liabilities decreased 3.8%, resulting in a decrease to funding ratios by April month-end.

Pension funded status market summary:

Equity markets delivered weak performance with Global Equities and the S&P 500 down over the month.
Plan liabilities modestly decreased over the month due to rising discount rates.
Funding ratio levels decreased with the drop in assets outpacing the decline in liabilities.

	Funded status risk	Apr 2024
	Equities
	Interest rates
	Credit spreads
	Sources: LGIM America, ICE indices and Bloomberg. Data as of April 30, 2024.

“Global equities” referred to here is represented by the MSCI AC World Total Gross Index.
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.
Prior to January 2023 the funded ratio of a typical US corporate defined benefit plan was calculated using an approximate duration of 12 years and a 60% MSCI AC World Total Gross Index / 40% Bloomberg US Aggregate Index (“60/40“) investment allocation strategy incorporating data from LGIM America research, ICE indices and Bloomberg. The change to a “50/50“ asset allocation reflects our understanding that most US corporate defined benefit plans have extended the duration of their fixed income as funded status has improved for the broader market. Furthermore, we believe that the duration of a typical plan's fixed income portfolio is better represented by the Bloomberg US Long Government/Credit Index compared to the Bloomberg US Aggregate Index.

For educational purposes only.

LGIM America's Pension Solutions Monitor, which estimates the health of a typical US corporate defined benefit pension plan, estimates that pension funding ratios increased throughout March 2024. Based on market movements, the average funding ratio is estimated to have improved from 107.3% to 108.2%.

Equity markets experienced strong performance over the month with both Global Equities¹ rising 3.1% and the S&P 500 rising 3.2%. Plan discount rates² were estimated to have decreased 11 basis points over the month with the Treasury component decreasing 5 basis points and the credit component tightening 6 basis points. Plan assets with a traditional “50/50” asset allocation increased 2.4% while liabilities increased 1.5%, resulting in an increase to funding ratios by March month-end.

The Pension Solutions Monitor now assumes a typical liability profile using an approximate duration of 12 years and a 50% MSCI AC World Total Gross Index / 50% Bloomberg US Long Government/Credit Index investment strategy. Our analysis incorporates data from LGIM America research, ICE indices and Bloomberg.³

Pension funded status market summary:

Equity markets delivered strong performance with Global Equities and the S&P 500 up over the month.
Plan liabilities modestly increased over the month due to falling discount rates.
Funding ratio levels increased with the rise in assets outpacing the rise in liabilities.

Funded status risk	Mar 2024
Equities
Interest rates
Credit spreads

Sources: LGIM America, ICE indices and Bloomberg. Data as of March 28, 2024.

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.
3. Prior to January 2023 the funded ratio of a typical US corporate defined benefit plan was calculated using an approximate duration of 12 years and a 60% MSCI AC World Total Gross Index / 40% Bloomberg US Aggregate Index (“60/40“) investment allocation strategy incorporating data from LGIM America research, ICE indices and Bloomberg. The change to a “50/50“ asset allocation reflects our understanding that most US corporate defined benefit plans have extended the duration of their fixed income as funded status has improved for the broader market. Furthermore, we believe that the duration of a typical plan's fixed income portfolio is better represented by the Bloomberg US Long Government/Credit Index compared to the Bloomberg US Aggregate Index.

US pension funding ratios increased throughout February

LGIM America's Pension Solutions Monitor, which estimates the health of a typical US corporate defined benefit pension plan, estimates that pension funding ratios increased throughout February 2024. Based on market movements, the average funding ratio is estimated to have improved from 103.9% to 107.3%.

Equity markets experienced strong performance over the month with both Global Equities¹ rising 4.3% and the S&P 500 rising 5.3%. Plan discount rates² were estimated to have increased 27 basis points over the month with the Treasury component increasing 23 basis points and the credit component widening 4 basis points. Plan assets with a traditional “50/50” asset allocation increased 0.9% while liabilities decreased 2.2%, resulting in an increase to funding ratios by February month-end.

The Pension Solutions Monitor now assumes a typical liability profile using an approximate duration of 12 years and 50% MSCI AC World Total Gross Index / 50% Bloomberg US Long Government/Credit Index investment strategy. Our analysis incorporates data from LGIM America research, ICE indices and Bloomberg.

Pension funded status market summary:

Equity markets delivered strong performance with Global Equities and the S&P 500 up over the month.
Plan liabilities decreased over the month due to rising discount rates.
Funding ratio levels increased with the rise in assets and decrease in liabilities.

Funded status risk	Feb 2024
Equities	↑
Interest rates	↑
Credit spreads	↑

Sources: LGIM America, ICE indices and Bloomberg. Data as of February 29, 2024.

US pension funding ratios remained relatively unchanged throughout January

LGIM America's Pension Solutions Monitor, which estimates the health of a typical US corporate defined benefit pension plan, estimates that pension funding ratios remained relatively stable throughout January 2024. Based on market movements, the average funding ratio is estimated to have modestly declined from 104.1% to 103.9%.

Equity markets modestly increased throughout the month with Global Equities¹ rising 0.61% and the S&P 500 up 1.68%. Plan discount rates² were estimated to have increased 7 basis points over the month with the Treasury component increasing 12 basis points and the credit component tightening 5 basis points. Plan assets with a traditional “50/50” asset allocation decreased 0.46% while liabilities decreased 0.29%, resulting in relatively stable funding ratios by January month-end.

Pension funded status market summary:

Equity markets delivered positive performance with Global Equities and the S&P 500 up slightly over the month.
Plan liabilities decreased over the month due to rising Treasury yields.
Funding ratio levels remained relatively stable throughout the month

Funded status risk	Jan 2024
Equities	↑
Interest rates	↑
Credit spreads	↓

Sources: LGIM America, ICE indices and Bloomberg. Data as of January 31, 2024.

US pension funding ratios increased 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 increased throughout December 2023. Based on market movements, the average funding ratio is estimated to have increased from 103.4% to 104.1%.

Equity markets were strong throughout the month with Global Equities¹ increasing 4.8% and the S&P 500 rising 4.5%. Plan discount rates² were estimated to have decreased 52 basis points over the month with the Treasury component decreasing 51 basis points and the credit component tightening 1 basis point. Plan assets with a traditional “50/50” asset allocation increased 6.4% while liabilities increased 5.7%, resulting in an increase in funding ratios by December month-end.

Pension funded status market summary:

Equity markets delivered strong performance with Global Equities and the S&P 500 up over the month.
Plan liabilities increased over the month due to decreasing Treasury yields.
Funding ratio levels increased as the rise in assets outpaced the rise in liabilities.

Funded status risk	Dec 2023
Equities	↑
Interest rates	↓
Credit spreads	↓

Sources: LGIM America, ICE indices and Bloomberg. Data as of December 29, 2023.

“Global equities” referred to here is represented by the MSCI AC World Total Gross Index.
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.
Prior to January 2023 the funded ratio of a typical US corporate defined benefit plan was calculated using an approximate duration of 12 years and a 60% MSCI AC World Total Gross Index / 40% Bloomberg US Aggregate Index (“60/40“) investment allocation strategy incorporating data from LGIM America research, ICE indices and Bloomberg. The change to a “50/50“ asset allocation reflects our understanding that most US corporate defined benefit plans have extended the duration of their fixed income as funded status has improved for the broader market. Furthermore, we believe that the duration of a typical plan's fixed income portfolio is better represented by the Bloomberg US Long Government/Credit Index compared to the Bloomberg US Aggregate Index.

For educational purposes only.

US pension funding ratios increased throughout November

LGIM America's Pension Solutions Monitor, which estimates the health of a typical US corporate defined benefit pension plan, estimates that pension funding ratios increased throughout November 2023. Based on market movements, the average funding ratio is estimated to have increased from 102.2% to 103.4%.

Equity markets were strong throughout the month with Global Equities¹ increasing 9.3% and the S&P 500 rising 9.1%. Plan discount rates² were estimated to have decreased 78 basis points over the month with the Treasury component decreasing 57 basis points and the credit component tightening 21 basis points. Plan assets with a traditional “50/50“ asset allocation increased 9.6% while liabilities climbed 8.2%, resulting in a modest increase in funding ratios by November month-end.

Pension funded status market summary:

Equity markets delivered strong performance with Global Equities and the S&P 500 up over the month.
Plan liabilities increased over the month due to declining discount rates.
Funding ratio levels increased modestly as the rise in assets outpaced the rise in liabilities.

Funded status risk	Nov 2023
Equities	↑
Interest rates	↓
Credit spreads	↓

Sources: LGIM America, ICE indices and Bloomberg. Data as of November 30, 2023.

“Global equities” referred to here is represented by the MSCI AC World Total Gross Index.
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.
Prior to January 2023 the funded ratio of a typical US corporate defined benefit plan was calculated using an approximate duration of 12 years and a 60% MSCI AC World Total Gross Index / 40% Bloomberg US Aggregate Index (“60/40“) investment allocation strategy incorporating data from LGIM America research, ICE indices and Bloomberg. The change to a “50/50“ asset allocation reflects our understanding that most US corporate defined benefit plans have extended the duration of their fixed income as funded status has improved for the broader market. Furthermore, we believe that the duration of a typical plan's fixed income portfolio is better represented by the Bloomberg US Long Government/Credit Index compared to the Bloomberg US Aggregate Index.

For educational purposes only.

US pension funding ratios decreased throughout October

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 throughout October 2023. Based on market movements, the average funding ratio is estimated to have decreased from 102.6% to 102.2%.

Equity markets were weak throughout the month with global equities¹ decreasing 2.9% and the S&P 500 falling 2.1%. Plan discount rates² were estimated to have increased 41 basis points over the month with the Treasury component increasing 35 basis points and the credit component widening 6 basis points. Plan assets with a traditional “50/50” asset allocation decreased 3.7% while liabilities dropped 3.3%, resulting in a modest decrease in funding ratios by October month-end.

Pension funded status market summary:

Equity markets delivered weak performance with global equities and the S&P 500 down over the month.
Plan liabilities decreased over the month due to rising discount rates.
Funding ratio levels fell modestly as the drop in assets outpaced the drop in liabilities.

Funded status risk	Oct 2023
Equities	↓
Interest rates	↑
Credit spreads	↑

Sources: LGIM America, ICE indices and Bloomberg. Data as of October 31, 2023.

“Global equities” referred to here is represented by the MSCI AC World Total Gross Index.
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.

For educational purposes only.

US pension funding ratios decreased throughout September

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 throughout September 2023. Based on market movements, the average funding ratio is estimated to have decreased from 103.6% to 102.6%.

Equity markets were weak throughout the month with global equities¹ decreasing 4.1% and the S&P 500 falling 4.8%. Plan discount rates² were estimated to have increased 50 basis points over the month with the Treasury component increasing 52 basis points and the credit component tightening 2 basis points. Plan assets with a traditional “50/50” asset allocation decreased 5.2% while liabilities dropped 4.2%, resulting in a decrease in funding ratios by September month-end.

Pension funded status market summary:

Equity markets delivered weak performance with global equities and the S&P 500 down over the month.
Plan liabilities moderately decreased over the month due to rising Treasury yields.
Funding ratio levels fell as the drop in assets outpaced the drop in liabilities.

Funded status risk	Sept 2023
Equities	↓
Interest rates	↑
Credit spreads	↓

Sources: LGIM America, ICE indices and Bloomberg. Data as of September 29, 2023.

“Global equities” referred to here is represented by the MSCI AC World Total Gross Index.
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.

For educational purposes only.

US pension funding ratios decreased throughout August

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 August 2023. Based on market movements, the average funding ratio is estimated to have decreased from 104.9% to 103.6%.

Equity markets were weak throughout the month with Global Equities¹ decreasing 2.8% and the S&P 500 decreasing 1.6%. Plan discount rates² were estimated to have increased 18 basis points over the month with the Treasury component increasing 19 basis points and the credit component tightening 1 basis point. Plan assets with a traditional “50/50” asset allocation decreased 2.5% while liabilities decreased 1.4%, resulting in a fall in funding ratios by August month-end. The decrease in equities outpaced the drop in liabilities to push funding ratios lower throughout the month.

Pension funded status market summary:

Equity markets delivered weak performance with Global Equities and the S&P 500 down.
Plan liabilities moderately decreased over the month.
Funding ratio levels dropped as the decrease in assets outpaced the drop in liabilities.

Funded status risk	Aug 2023
Equities	↓
Interest rates	↑
Credit spreads	↓

Sources: LGIM America, ICE indices and Bloomberg. Data as of August 31, 2023.

“Global equities” referred to here is represented by the MSCI AC World Total Gross Index.
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.

For educational purposes only.

Get in touch

LGIM America

71 South Wacker Drive
Suite 800
Chicago, IL 60606

Call us at 312.585.0300