Solid Improvement for DB Finances in ’21, Says Study

The fortunes of private-sector pension plans improved markedly in the year that just ended, says a new report.

 

October Three tracks two hypothetical DB plans—one that is invested in a more traditional way with a 60/40 asset allocation, and another invested in a conservative manner with a 20/80 allocation and a greater emphasis on corporate and long-duration bonds. They report that both plans showed slight improvement in December, but stronger improvement for 2021 overall.

 

 

In December, says October Three, the traditionally invested plan’s finances improved by almost 2%, while those of the more conservatively invested plan improved by less than 1%. The traditionally invested plan’s 60/40 portfolio gained 1%, they report, while that of the conservative plan with an 20/80 portfolio remained static. And pension liabilities fell less than 1%.

 

The December results were a reversal of those of the previous month; pension finances had lost some ground in November. 

 

 

October Three did not mince words about 2021, which they say “was the best year for pensions since 2013 and the second-best year this century.”

 

Pension finances for the traditionally invested plan they track improved by 11%, and the more conservatively invested plan ended the year 3% better than on the previous New Year’s Eve. 

 

The traditionally invested plan’s 60/40 portfolio improved by more than 8% for the year overall, they report, while that of the conservative plan with an 20/80 portfolio improved by almost 1%. 

 

And pension liabilities finished 2021 down 2%-3%; October Three reports that the biggest drop in pension liabilities was for long duration plans.