The sharp increase in discount rates drove positive second quarter pension index results for most regions. Asset returns were negative for all regions for the quarter which notably offset the liability gains. While inflationary pressures generally continued, the market with the strongest link of pensions to inflation, the United Kingdom, has lower inflation than last quarter. The overall impact of these changes resulted in positive pension index returns for all markets during Q2 apart from Brazil and the U.S. where the negative asset returns were greater than the liability gains. In addition, multinational companies are facing shifts in exchange rates, with a notable strengthening of the U.S. Dollar.
While it is always the case that Global Pension Finance Watch captures results at the end of each quarter, we particularly want to highlight the point in time view of this publication in light of current volatility. WTW supports the daily monitoring of pension funded status and other key pension financial metrics for those organizations wishing to inform key business decisions.
Global Pension Finance Watch, published quarterly, reviews how capital market performance affects defined benefit pension plan financing in major retirement markets worldwide, with a focus on linked asset/liability results. We cover defined benefit pension plans in Brazil, Canada, the Eurozone, Japan, Switzerland, the U.K. and the U.S. Specific plan results will vary, often substantially, based on liability characteristics, contribution policy, portfolio composition and management strategy among other factors. The passage of time since quarter end, may also have a significant impact on pension plan financing.
The impact of capital markets on these pension plans is twofold:
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|Global Pension Finance Watch: Second Quarter 2022