The increases in interest rates throughout 2022 improved pensions' funded status and provided attractive yields for sponsors wanting to de-risk by increasing their allocation to fixed-income assets, according to a new report.

A decade of volatile stock markets, including during the once-in-100-years pandemic, reveals growth in U.S. corporate pensions' funded status. MetLife Investment Management (MIM), the institutional asset management business of MetLife, estimates that, as of November 7, 2022, the average U.S. corporate pension's funded status was at 106.3 percent—the highest in 10 years. The quarter-end average was 104.7 percent, which is 4 percentage points above the end of the second quarter.

"The increase in interest rates seen in 2022 has improved pension funded status and provided attractive yields for sponsors wanting to de-risk by increasing their allocation to fixed income," said Stephen Mullin, head of long duration and LDI [liability-driven investing] strategies at MIM. Furthermore, according to LDI strategist Jeff Passmore, "asset returns outpaced liability increases, resulting in improved funded status during the fourth quarter."