EUROPE – Consulting firm Towers Perrin says rising equity markets have resulted in a four percent rise in the funded status of defined benefit pension plans in the euro-zone in the second quarter.
Despite the gains, European plans are still down by 44% since January 2000, it said.
In the year-to-date, euro-zone plans’ funding fell by three percent, while UK plans are down five percent. In the second quarter, UK plans rose nine percent.
“The equities market recovered considerably in the second quarter of 2003 resulting in an overall positive return for both the quarter and year to date,” the firm said, referring to the euro-zone. It said the euro-zone results are based on “typical funded plans found in Belgium and the Netherlands”.
“Bond yields continued their decline during the quarter, which has in turn led to another decrease in the benchmark discount rate and an increase in liability. However, this was more than offset by the positive investment return, resulting in a four percent increase in funded status for the benchmark plan.”
The findings come in a report called “Towers Perrin Global Capital Market Update: Second Quarter 2003 Results”. The firm has examined the impact of changes in the stock and bond markets on a benchmark plan in each country, with liabilities estimated under accepted international accounting standards.
"The improvement in pension plan funding levels that we saw in the second quarter was driven largely by the rise in stock markets around the world," said Steven Kerstein, managing director of Towers Perrin's global retirement practice.
"Employers with pension plans have been active on a number of fronts in their efforts to respond to the large swings in financial markets and the decrease in plan funding levels," said Leon Potgieter, principal and head of Towers Perrin's global consulting group.