The level of underfunding in corporate pension funds is at its worst in North America, shows analysis by MSCI ESG Research.
The firm looked at the funded status of almost 5,300 companies that disclose details of their defined benefit funds, across North America, Western Europe, Asia-Pacific and Japan. It analyzed the ratio of underfunded liabilities to annual revenues of the company.
North America’s underfunded ratio was 9.2% according to the analysis made in September. Europe came in second at 4.7%, followed by Japan at 3.7%, and Asia-Pacific at 1.8%.
For Western Europe, Denmark had the best ratio at an average of 2.1%. That compares with the worst underfunded companies, which reside in the U.K., with an average 7.8% underfunding. In North America, Canada’s 6.1% average underfunded ratio bettered the U.S.’s 10.3% average. In Asia-Pacific, Thailand-based companies showed the best average underfunded ratios, at 1.2%, compared with the worst in Singapore at an average 2.5%.
Compared with 2015 figures, the underfunded ratio increased across all four regions, with a few exceptions at country level. The ratio increased 21.7% in 2016 vs. 2015 in North America, 8.2% in Western Europe, and 41.1% in Asia-Pacific. For Japan, the underfunded ratio grew 5.7% over the year. Specific dates were not available.
MSCI analysed 5,296 companies from Europe, North America, Asia and Japan. In addition to breaking down the company results by country, MSCI also looked into results for each industry. Among 1,457 European companies in the sample, semiconductor firms, pharmaceutical companies and banks were among the worst ranked sectors.
MSCI also “flagged” companies that ranked in the weakest 20% of their industry peer groups. The UK had the highest proportion of its companies flagged as among the weakest – 38%.