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2017 Pension Review “First Take:” It Should Be Different This Time

In this year’s Pension Review “First Take:” It Should Be Different This Time, we highlight key observations based on our analysis of the 50 largest US DB plans in the S&P 500, spanning topics from such areas as system-wide funded status, asset allocation and actuarial assumptions. Michael Moran, CFA, Senior Pension Strategist, outlines key pension trends based on our annual review, as well as our views on how things may play out in the US corporate DB universe in 2018. 

Executive Summary

  • US Corporate Defined Benefit (DB) funded levels are at an important inflection point, having posted their first annual year-over-year increase since 2013. Funded levels have risen further year-to-date in 2018.
  • We expect to see increases to fixed income allocations by some plans in 2018 given the rise in funded levels, some of which has been foreshadowed by changes to strategic target allocations. Whereas some plans did not shift asset allocation in the past when funded levels had risen, we believe it should be different this time.
  • Such portfolio shifts could also help to facilitate risk transfer actions. Annuity purchase risk transfer strategies accelerated in 2017 and we expect this to continue in 2018 as part of broad de-risking actions.


Key findings of our 16th annual pension review include:


  • Ninety percent of the plans in our “First Take” sample posted a year-over-year increase in their funded percentage, and the system as a whole saw a rise in aggregate funded status of over 4 percentage points.
  •  Strong asset returns and voluntary contribution activity drove funded levels higher, although lower discount rates offset some of the gains.
  • Actual allocations to fixed income were only marginally higher than the year before, indicating that 2018 may be the year that many plans undertake portfolio adjustments.
  • Return assumptions continued to move lower, albeit at a somewhat slower pace. Disclosures around 2018 return assumptions suggest the trend may continue.

EXHIBIT 1: Asset Returns and Contributions Carried the Day in 2017

2018 pension first take exhibit 1

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