Corporate Adviser
  • Content Hubs
  • Magazine
  • Alerts
  • Events
  • Video
    • Master Trust Conference 2024 videos
  • Research & Guides
  • About
  • Contact
  • Home
  • News
  • In Depth
  • Profile
  • Pensions
    • Auto-enrolment
    • DB
    • DC
    • Defaults
    • Investment
    • Master Trusts
    • Sipps & SSAS
    • Taxation
  • Group Risk
    • Group Life
    • Group IP
    • Group CIC
    • Mental Health
    • Rehab
    • Wellbeing
  • Healthcare
    • Musculoskeletal
    • Mental Health
    • IPT
    • Wellbeing
    • Trusts
    • Cash Plans
  • Wellbeing
    • Mental Health
    • Health & Wellbeing
    • Financial resilience
  • ESG
No Result
View All Result
Corporate Adviser
No Result
View All Result

DB scheme surpluses climb by £59.5bn

by Muna Abdi
September 13, 2022
Share on FacebookShare on TwitterShare on LinkedInShare on Pinterest

UK’s schemes funding continues to improve, with the aggregate surplus of the 5,215 schemes in the PPF 7800 Index rising by £59.5bn to £313.8bn, according to The Pension Protection Fund (PPF).

According to the September PPF 7800 report, the surplus is at its largest level since the PPF 7800 began disclosing data.

The funding ratio grew to 125.1 per cent from 118.2 per cent at the end of July 2022. There were £1,565.0bn in total assets and £1,251.2bn in total liabilities. There were 4,081 schemes that were in surplus and 1,134 that were in deficit. At the end of August 2022, the total deficit of the deficit schemes was £14.3bn, down from £29.8bn at the end of July 2022.

PPF chief finance officer and chief actuary Lisa McCrory says: “The unprecedented rise in bond yields last month saw the funding position for the 5,215 schemes under our protection increase by £59.5bn to £313.8bn. This was mainly a result of the Bank of England’s forceful approach to tackling inflation, their plans to sell off gilt holdings, and expectations that the new Prime Minister’s programme of tax cuts and energy market intervention will cause a material increase in the UK’s borrowing.

“We’ve not seen an increase in bond yields like this since January 2009, and the overall increase since November 2021 has more than doubled the largest previous increase in yields since the Bank of England gained independence in 1998.

“While the near-term economic outlook is highly uncertain, the PPF remains in a strong financial position and is well positioned to weather this period of uncertainty irrespective of how scheme funding and insolvency rates evolve in the future.”

Broadstone senior actuarial director Jaime Norman says: “Scheme funding continues to improve, driven by rising gilt yields and falls in liability values. This is tempered by a corresponding fall in bond values and ongoing volatility in global equity markets. 

“Whilst we are seeing improvements in funding levels across the board, those that have seen the biggest improvement include those with the lowest levels of liability hedging. Whilst it can be tempting to continue chasing further gains, employers and trustees should be considering if changes are needed to bank the gains seen to date.

“With funding improvements against a backdrop of high short-term inflation, scheme sponsors may expect to see an increase in focus on pension increases. In particular, those schemes that only pay statutory pension increases could see requests from trustees and members for one-off discretionary increases. 

“Any additional discretionary pension increase will have a financial impact on the scheme and scheme sponsors should be clear on how this will impact its long-term plans for the scheme. Employers may want to proactively raise this with trustees and work with trustees to manage how this is communicated to members.”

BlackRock head of UK fiduciary business Sion Cole says: “Markets are responding to the US Fed Chair’s Jackson Hole speech, where he reasserted the Fed’s commitment to bringing inflation down. So, while we see monetary policymakers ultimately accepting a higher rate of inflation in the short to medium terms, we are positioned across all asset classes for a continuation of the current monetary environment.”

“In the UK, the Bank of England has been candid about their assessment that raising interest rates enough to bring inflation down to the 2 per cent target, will ultimately harm the economy. More broadly, we think the UK is dealing with an underlying inflation issue driven not only by the shock of energy prices, but also a reduction in production capacity owing to low levels of labour supply. We are also beginning to see pressures on company earnings, which in turn has led to increasing numbers of corporate insolvencies, which denotes the strong need for contingency planning.

“Compared to the PPF 7800 index, not every scheme saw positive improvements last month – given these are also contingent on each scheme’s asset allocation and risk positioning. Furthermore, we’re neutral on European government bonds and have a modest overweight to UK gilts with a preference for short-dated bonds due to markets pricing in an overly hawkish rate path.”

“The substantial monthly gains and volatile economic environment continue to highlight the value of risk management and thoughtful positioning, with meeting liabilities and funding goals remaining key considerations. There is a continued lack of consensus from fund managers on where base rates will end up, and this illustrates why scheme managers must take a long-term view, and demonstrate the importance of diversification into multiple asset classes, including alternatives and illiquid securities.”

VIDEO FROM ROYAL LONDON


Find out more about how to support the switching of a workplace pension

Corporate Adviser Special Report

REQUEST YOUR COPY

Most Popular

  • Govt sets out roadmap for blockbuster pension reforms

  • Standard Life launches financial coaching platform for families

  • TPT launches managed retirement income for life offering

  • Capital Cranfield appoints LGIM DB head as trustee

  • Underestimating life expectancy leading to £35,000 shortfall in pension planning: BW

  • Govt Spending Review: industry reaction

Corporate Adviser

© 2017-2024 Definite Article Media Limited. Design by 71 Media Limited.

  • About
  • Advertise
  • Privacy policy
  • T&Cs
  • Contact

Follow Us

X
No Result
View All Result
  • Home
  • News
  • In Depth
  • Profile
  • Pensions
    • Auto-enrolment
    • DB
    • DC
    • Defaults
    • Investment
    • Master Trusts
    • Sipps & SSAS
    • Taxation
  • Group Risk
    • Group Life
    • Group IP
    • Group CIC
    • Mental Health
    • Rehab
    • Wellbeing
  • Healthcare
    • Musculoskeletal
    • Mental Health
    • IPT
    • Wellbeing
    • Trusts
    • Cash Plans
  • Wellbeing
    • Mental Health
    • Health & Wellbeing
    • Financial resilience
  • ESG

No Result
View All Result
  • Home
  • News
  • In Depth
  • Profile
  • Pensions
    • Auto-enrolment
    • DB
    • DC
    • Defaults
    • Investment
    • Master Trusts
    • Sipps & SSAS
    • Taxation
  • Group Risk
    • Group Life
    • Group IP
    • Group CIC
    • Mental Health
    • Rehab
    • Wellbeing
  • Healthcare
    • Musculoskeletal
    • Mental Health
    • IPT
    • Wellbeing
    • Trusts
    • Cash Plans
  • Wellbeing
    • Mental Health
    • Health & Wellbeing
    • Financial resilience
  • ESG

This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.