Pension Indicator Updated for June 30, 2022

Riding the Roller Coaster

By: Matthew Klein, Principal, USICG

It’s summertime and amusement parks everywhere are giving thrill-seekers the adrenaline rush they are looking for.  However, when it comes to investments, no one wants to ride the ride with the huge dip in it.

Alas, the tired roller coaster analogy is still apt for much of what we’ve observed in the first six months of the year. Our hypothetical portfolios are down 15% to 21% for the year depending on the asset mix.  The saving grace of this year, from a pension plan perspective anyway, continues to be the lower liabilities being generated by the increase in yields on bonds. 

With June 30 being the second most popular fiscal year end, plan sponsors will likely see discount rates in the 4.25%-4.75% range.  This is an increase of 160-185 basis points from twelve months ago. As the charts indicate, most plans will probably be around the same funded percentage as they were a year ago. Most sponsors will take that as a win, especially in the current environment. 

Furthermore, despite the significant drop in equity values for pension plan investments, we are still seeing very strong activity in de-risking activities to take advantage of interest rates that haven’t been seen in years. Group annuity sales were 40% higher in Q1 2022 compared to Q1 20211.

As always, thanks for reading, and drop us a comment on how we're doing.

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Information provided in this article is general in nature, is provided for informational purposes only, and should not be construed as investment advice. Performance data represents past performance.  Past performance is not indicative of future results

1LIMRA

Year to Date Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
Frozen (for several years) 0.2% -0.4% -3.1% -6.1%
 Recently Frozen 6.5% 5.9% 3.0% -0.2%
 Ongoing Traditional 13.7% 13.0% 9.8% 6.5%
 Cash Balance 1.7% 1.1% -1.7% -4.7%
Month-over-Month Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) -3.5% -2.7% -2.3% -1.7%
 Recently Frozen -2.7% -1.9% -1.5% -1.0%
 Ongoing Traditional -1.8% -1.1% -0.7% -0.1%
 Cash Balance -3.3% -2.5% -2.1% -1.5%
12-Month Change Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) 2.6% 1.6% -1.9% -5.6%
 Recently Frozen 8.6% 7.5% 3.8% -0.1%
 Ongoing Traditional
15.3% 14.2% 10.2% 6.1%
 Cash Balance 4.1% 3.1% -0.5% -4.2%


Frozen Plan 7 31

Recently Frozen Plan 7 31

Ongoing Plan 7 31

Cash Balance 7 31

Disclosure