'Silent heart attack' for pensions driven by yields

Corporate pension plans in the US are falling behind future payouts to retirees by the most in a decade amid a slowing economy and the lowest bond yields on record.

The gap between the assets of the 100 largest company pensions and their projected liabilities widened by $108 billion in August from the previous month to a $459.8 billion deficit, actuarial and consulting firm Milliman Inc said today in a statement.

The shortfall is “like a silent heart attack,” said Kenneth Hackel, president of research and consulting firm CT Capital LLC. “People aren’t recognising the symptoms until the patient falls on the ground.”

Corporate pension plans are a casualty of Federal Reserve efforts to keep interest rates low to prevent the economy from slipping back into recession. As AA rated company bond yields, a benchmark in determining future liabilities, last month reached the lowest ever, obligations increased $91 billion to $1.54 trillion, Seattle-based Milliman said, without disclosing company names.