Industry News

On February 1, 2022, S&P Global released its report, Five Public Pension and OPEB Credit Considerations to Watch in 2022. According to S&P, “public pension system funded ratios generally improved in fiscal 2021, often significantly, with market returns of near 30%, but S&P Global Ratings notes that large unfunded pension liabilities remain a significant pressure point for states and local governments around the country.”

The key highlights include:

• In the U.S. public finance sector, pension funding improved after very strong market returns in 2021; however, a decrease in contributions may affect some of the progress.
• Over the long term, high inflation may impact pensions, but is unlikely to result in significant short-term changes to liabilities or costs.
• If bond rates remain low, pension obligation bonds (POBs) will likely continue to increase; however, anticipated rate increases could interrupt issuance plans.
• Due to the COVID-19 pandemic, demographic impacts may continue for some time; however, there may be limited pension funding relief despite increased mortality from COVID-19.
• Environmental, social, and governance (ESG) considerations will continue to influence pension management, including contribution and benefit reforms.

The report is available here.