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Pension finances suffered a modest setback in November, the first negative month since March. Both model plans we track[1] lost ground last month: traditional Plan A lost almost 1%, ending the month up 6% for the year, while the more conservative Plan B lost a fraction of 1% last month but remains up more than 1% through the first eleven months of 2025:
Assets
Stocks were mixed in November; a diversified stock portfolio was flat last month and remains up 21% for the year, led by overseas markets:
Bond yields declined a few basis points during November. As a result, bonds gained less than 1% last month. For the year, bonds have gained more than 7%.
Overall, our traditional 60/40 portfolio gained a fraction of 1% last month and is now up more than 14% so far this year, while the conservative 20/80 portfolio also gained a fraction of 1% last month and is now up 9% through the first eleven months of 2025.
Liabilities
Pension liabilities (for funding, accounting, and de-risking purposes) are driven by market interest rates. The first graph below compares our Aa GAAP spot yield curve at December 31, 2024 and November 30, 2025 (along with the movement in the curve last month). The second graph below shows our estimate of movements in effective GAAP discount rates for pension obligations of various duration during 2025:
Corporate bond yields fell a few basis points during November, reaching new lows for the year. As a result, pension liabilities increased less than 1% last month, ending November up 7%-8% for the year so far over a broad range of liability durations.
Summary
Despite the pullback in November, pension finances have enjoyed another strong year in 2025. The graphs below show the movement of assets and liabilities for our two model plans through the first eleven months of the year:
Looking Ahead
Sustained higher interest rates since late 2022 have substantially diminished the impact of pension funding relief since 2023. Underfunded plans are likely seeing higher required contributions for the next few years.
Interest rates were down a smidgen last month. We expect most pension sponsors will use effective discount rates in the 5.0%-5.4% range to measure pension liabilities right now.
The table below summarizes rates that calendar-year plan sponsors are required to use for IRS funding purposes for 2025, along with estimates for 2026, including the rate “corridor” that applies to the 24-month average rates under funding relief for each segment.
[1] Plan A is a traditional plan (duration 12 at 5.5%) with a 60/40 asset allocation, while Plan B is a largely retired plan (duration 9 at 5.5%) with a 20/80 allocation with a greater emphasis on corporate and long-duration bonds. We assume overhead expenses of 1% of plan assets per year, and we assume the plans are 100% funded at the beginning of the year and ignore benefit accruals, contributions, and benefit payments in order to isolate the financial performance of plan assets versus liabilities.