Rebounding Stock Markets Make September Best Month of 2010 for Pension Plans

BOSTON, October 7, 2010 — September produced the strongest one-month gain this year in funding status for the typical U.S. corporate pension plan as rebounding stock markets propelled the funded status of the typical plan 4.6 percentage points higher to 75.9 percent, according to monthly statistics published by BNY Mellon Asset Management.

For the month of September, assets for the typical plan increased 5.7 percent as U.S. equity markets rose 9.4 percent and international stocks increased 9.8 percent, according to the BNY Mellon statistics.  The pension plans also benefitted from a small increase in the Aa corporate discount rate to 4.98 percent from 4.92 percent at the end of August, the report said.

This increase in the discount rate sent the liabilities for the typical plan down 0.7 percent, according to the BNY Mellon Pension Summary Report for September 2010.  Plan liabilities are calculated using the yields of long-term investment grade corporate bonds.  Higher yields on these bonds result in lower liabilities.

"The September rally helped recover much of the funded-status deterioration that occurred during August, when both the equity markets and interest rates declined and left the typical plan in its worst position since we began tracking these statistics in 2006," said Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management.  "Despite this significant market rally, the typical plan's funded status finished September 7.6 percentage points lower than it was at the beginning of the year."

Austin added, "The last two months illustrate the high volatility of pension plan funding levels that is prompting many plan sponsors to take steps to reduce plan funding volatility.  Funding volatility is a reflection of the risks that plan sponsors are assuming, which go well beyond investment risk and interest rate risk.   Ensuring that the risk profile of a pension plan aligns with the sponsor's ability and willingness to assume risk is becoming a high priority for plan sponsors.  Establishing a long-term pension risk management framework that includes traditional liability driven investing (LDI) strategies and/or dynamic asset allocation is a path that sponsors are finding helpful in these challenging economic times. "

BNY Mellon Asset Management is the umbrella organization for BNY Mellon's affiliated investment management firms and global distribution companies.

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has $21.8 trillion in assets under custody and administration and $1.0 trillion in assets under management, services $11.6 trillion in outstanding debt and processes global payments averaging $1.5 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available at www.bnymellon.com.

All information source BNY Mellon Asset Management as of June 30, 2010. This press release is qualified for issuance in the US only and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. This press release is issued by BNY Mellon Asset Management to members of the financial press and media and the information contained herein should not be construed as investment advice.  Past performance is not a guide to future performance.