U.S. corporate defined benefit plans have reached their strongest average funding level since the 2008 financial crisis, according to BlackRock's 2025 Corporate Pension Peer Study. The report, which analyzed over 500 plans and focused on the 200 largest, found the average funded ratio climbed to 108% by the end of fiscal 2025. More than half of all plans are now fully funded, reflecting the combined impact of higher interest rates, sustained de-risking, and tighter risk controls.
Yet the aggregate figure masks a widening gap. Over 20% of plans remain below 90% funded, with disparities tied to sponsor size, industry, and investment approach. BlackRock describes this as a "pivoting moment" for corporate pensions, where the focus for many sponsors is shifting from rebuilding funded status to protecting existing surpluses. This transition is reshaping portfolio construction and risk appetite across the industry.
Preserving Gains
For plans that have reached or exceeded full funding, preservation has become paramount. The study notes that plans just above the 100% funded threshold tend to hold the lowest expected returns, signaling a deliberate move to reduce risk rather than chase additional upside. This is evident in more conservative return assumptions and a greater emphasis on liability-driven investing (LDI).
Across the broader universe, expected returns on assets edged up to 6.7% in 2025 from post-pandemic lows, driven largely by improved fixed-income return expectations following the rise in interest rates. However, the report finds that funding levels alone do not determine return assumptions. Instead, factors such as liability profiles, governance frameworks, glidepath strategies, and the balance between active and passive management play a more decisive role.
Asset Allocation Shifts
Fixed income now represents 54% of the average portfolio, a continued move toward liability-aware investing. But the nature of that exposure is evolving. Sponsors are expanding into a broader range of credit assets, including securitized products and private high-grade investments, while using more advanced LDI strategies to fine-tune alignment with liabilities. This trend aligns with broader industry moves, such as BlackRock Aladdin and RedBlack's recent upgrades in private credit analytics.
Plan size remains a key differentiator. Larger pension plans, which tend to be better funded, maintain more diversified portfolios that extend beyond traditional public markets. These sponsors often allocate to private equity, infrastructure, and other drawdown-based investments, giving them additional return sources and flexibility. As a result, larger plans may have less exposure to public fixed income than their smaller counterparts. Smaller plans, meanwhile, continue to rely more heavily on public equities as their primary growth engine, though many are beginning to incorporate higher-yielding credit strategies and explore new ways to diversify returns.
No One-Size-Fits-All
The report underscores that outcomes are driven primarily by plan-specific decisions rather than broad market conditions. Differences in contribution history, liability structure, governance, and investment design all shape results. For underfunded plans, the focus remains on generating returns efficiently to close funding gaps. For those in surplus, the challenge is preserving that position while aligning pension risk with broader corporate objectives.
This divergence is creating a more complex landscape. While the overall health of U.S. corporate pensions has strengthened, the path forward will depend less on macro trends and more on how individual sponsors navigate this transition from recovery to resilience. As advisors help clients manage these shifts, understanding the nuances of plan-specific strategies becomes critical, especially as surveys reveal a generational divide in retirement planning that may influence sponsor decisions.
