Interest rates 2020: effect on retirement finance – introduction

The valuation interest rates for a typical DB plan have declined around 90 basis points since the beginning of the year, and – extraordinarily – almost 50 basis points since the beginning of March. This in the context of a 75-100 basis point decline for 2019. This decline, and the simultaneous decline in stock values… Read More

February 2020 Pension Finance Update

Pension pain intensified in February, as stock markets and interest rates tumbled last month. Both model plans we track[1] lost ground: Plan A lost more than 5%, ending the month almost 10% lower than at the end of 2019, while Plan B slipped 2% and is now down 3% for the year: Assets Stock markets moved… Read More

De-risking in 2020

In this article we discuss how changes in interest rates, Pension Benefit Guaranty Corporation premiums, and mortality assumptions may affect sponsor decisions to de-risk (or not de-risk) defined benefit plan liabilities in 2020. For purposes of this article, by de-risking we mean paying out a participant’s benefit as a lump sum and thereby eliminating the… Read More

Interest rates 2020 — signal or noise?

In November 2019 we published an article reviewing interest rates broadly. At that time, interest rates were down 75-100 basis points for the year and nearly 120 basis points from their high in November 2018. In that context, we identified the key question for DB plan sponsors, for whom plan-related interest rate risk is a significant… Read More

Annuity Purchase Update: February 2020 Interest Rates

February 2020 Duration: 7 Years 15 Years   7 Years 15 Years Range Rate: 1.68% – 2.10% 1.98% – 2.30% Average Rate: 1.93% 2.12% As mentioned in our January 2020 Pension Finance Update, pension plans lost ground last month. The strong equity market returns of 2019 were set back by a poor performance in January…. Read More

January 2020 Pension Finance Update

Pensions got clobbered in January, as stock markets mostly lost ground while interest rates reached new all-time lows. Both model plans we track lost ground last month, with Plan A dropping 4% while the more conservative Plan B lost 1%.

Annuity Purchase Update: January 2020 Interest Rates

The average duration 7 annuity purchase interest rates and average duration 15 rates have both increased by roughly 30 basis points since September 2019. This increase in rates since September led to a corresponding decrease in annuity purchase prices of approximately 7% for both Annuity Plan 1 and Annuity Plan 2.

SECURE implementation: effective dates of key provisions

Changes to current rules applicable to retirement plans made by the Setting Every Community Up for Retirement Enhancement (SECURE) Act (signed into law by President Trump on December 20, 2019) are (in most cases) already effective. In this article we review, very briefly, the effective dates of some of the key provisions of SECURE and sponsor… Read More

December 2019 Pension Finance Update

2019 was the best of times, then the worst of times, then the best of times again for pension finance. Overall assessment: meh. During December, both model plans we track[1] gained ground for the fourth consecutive month: Plan A improved 2% and finished 2019 even, while Plan B gained less than 1%, ending 2019 up less… Read More

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