Pension plans sponsored by companies in the US's S&P 1500 index hit a five-year high at the end of last month, Mercer said today in its monthly estimate
Funding levels improved during September, with a funded ratio of 91%, up from 89% at the end of August. This corresponds to a deficit of $182bn, down from $557bn recorded at the end of December 2012.
Jonathan Barry, a partner in Mercer's retirement business, said: 'It's been a long road - nearly five years - for plan sponsors to get back over a 90% funded status.'
He added that the plans' recovery of over $500bn from a 'deficit high water mark' at the end of July demonstrated the levels of volatility to which they were exposed.
Richard McEvoy, a partner in Mercer's investments business department, added: 'With this rapid improvement also comes the opportunity for sponsors to take some of the pension plan risk off the table, through changes in investment policy, risk transfer strategies, or a combination of both.
'The key is to have a plan in place, to capitalise on the improvement,' he continued.
'We have seen too many times where these high funded ratios decline quickly due to market events and plan sponsors lose out on the funded status gains.'
Mercer now estimates that 20% of plans in the S&P 1500 are now over 100% funded. This is up 'dramatically' from an estimate of only 4% at the end of 2012, Mercer said.
