Low interest rates and, in
particular, a weak equity market are taking their toll on defined
benefit (DB) pension schemes in the US.
For scheme sponsors the
Society of Actuaries warns that it means one thing: a significant
increase in their minimum required contributions.
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According to the SOA,
sponsors’ cash contributions to private sector pension plans have
generally exceeded minimum required levels and in the 10 years to
2009 aggregate annual contributions averaged about
$66bn.
Looking ahead, the SOA
predicts that aggregate annual contributions will average about
$90bn between 2010 and 2019 with the first sharp rise likely in
2012. The SOA expects contributions to reach a peak of about $140bn
in 2016 before falling gradually to about $60bn in 2019.
The SOA noted that although
US corporations have in recent years generally been accumulating
more cash relative to historic levels, not all plan sponsors will
be able to meet the increased contributions easily.
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