“We are seeing the funding gap on these pensions move closer and closer to zero as strong investment markets continue to drive improving funding,” said Zorast Wadia, author of the Milliman 100 PFI. “But with discount rates below 3.00% over the past 12 months, it’s a marathon, not a sprint to full funding.”
Ultimately, as part of an optimistic forecast with rising interest rates (reaching 2.82% at the end of 2021 and 3.42% at the end of 2022) and asset gains (10.2% annual returns), the capitalization ratio would climb to 101% at the end of 2021 and 117% at the end of 2022. In a pessimistic forecast with similar interest rates and asset movements (discount rate of 2.62% at the end of 2021 and 2 , 02% at the end of 2022 and annual returns of 2.2%), the capitalization ratio would fall to 97% at the end of 2021 and to 88% at the end of 2022.
To view the full pension capitalization index, go to www.milliman.com/pfi. To see the full range of Milliman’s annual pension funding studies, visit https://www.milliman.com/en/retirement-and-benefits/pension-funding-studies. To receive regular updates on Milliman’s pension funding analysis, contact us at [email protected].
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SOURCE Milliman, Inc.