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Russell Investments research forecasts pension fund of 2017 to be better funded, less risky


Tacoma, WA — July 15, 2008 — By 2017, corporate pension plans will achieve higher funding levels and will pursue investment policies that accept far less risk, according to new research from Russell Investments forecasting the future for defined benefit plans. Russell expects only one plan in every four will have funding status below 90% and that the number of plans with significant shortfalls will be greatly reduced. As part of this developing trend, Russell is forecasting that corporate contributions to pension plans will become more sensitive to investment returns.

"The dynamics of corporate pension plans in the United States have been dramatically transformed by the Pension Protection Act of 2006 and other recent changes, and we are expecting a tremendous evolution over the next decade," said Michael Hall, Director, Investment Policy & Strategy, Russell.

The new research from Russell identifies four major trends anticipated for corporate pension plans:

 
  • Relatively few plans will find themselves significantly underfunded;
  • Variations in plan experience will be felt more in contribution volatility rather than in funded status volatility;
  • Plan sponsors will influence their plan through benefits policy, contribution policy and investment policy with the role of contributions becoming far more significant; and
  • Pension plans will, in general, accept less risk than they do today and the balance of the risks they take will be different.

"Traditionally, pension plans have accepted a great deal of interest rate risk and taken significant market risk, but we expect the extent of the risk taken in each of these areas to decline," said Hall.

Russell Investments regularly publishes cutting-edge research on issues of critical importance to plan sponsors, providing expert perspective on global markets, best practices for defined benefit and defined contribution programs and renowned analysis of money managers. To learn more about Russell research, go to http://www.russell.com/Institutional/research_commentary/our_research.asp.

About Russell
Russell Investments provides strategic advice, world-class implementation, state-of-the-art performance benchmarks and a range of institutional-quality investment products. With nearly $213 billion in assets under management as of March 31, 2008, Russell serves individual, institutional and advisor clients in more than 40 countries. Russell provides access to some of the world's best money managers. It helps investors put this access to work in corporate defined benefit and defined contribution plans, and in the life savings of individual investors.

Founded in 1936, Russell is a subsidiary of Northwestern Mutual Life Insurance Company and headquartered in Tacoma, Wash. Russell has principal offices in Amsterdam, Auckland, Johannesburg, London, Melbourne, New York, Paris, San Francisco, Singapore, Sydney, Tokyo and Toronto.

Contact:
Jennifer Tice, 253-439-1858
Matt Burkhard, 718-875-2122




Russell Investment Group, a Washington, USA corporation, operates through subsidiaries worldwide including Russell Investments.

Russell Investments is the owner of the trademarks, service marks and copyrights related to its indexes.

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First used: July 2008
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