The Pension Protection Fund (PPF) paid out £1bn in compensation over the past financial year – the first time payments have reached this milestone figure.
This money was paid out to the 179,500 of the PPF’s 288,000 members who have already retired or are in receipt of survivor benefits. The figure was reported in the PPF’s annual report and accounts for 2020/21.
While concerns around the pandemic’s impact on UK businesses remain, the funding position of this lifeboat fund improved over this period.
The PPF said this was the result of strong investment performance, coupled with rigorous risk management. The PPF’s funding position increased by 13.9 per cent to 127.3 per cent, and its reserves increased to £9bn — having previously fallen to £5.1bn in 2019/20 as a result of the markets’ reactions to the Covid-19 crisis.
The PPF also reported its assets under management grew from £36bn to £38bn and its growth assets returned 17.6 per cent (£3.7bn), its largest return on this investment portfolio to date.
The PPF reported solid progress on its objectives as set out in its 2019-22 strategic plan. It said it has continued to deliver consistently high levels of customer service to its members and levy payers.
In recognition of the pressures on levy payers impacted by Covid-19, the PPF offered a two-month interest-free payment extension on levy bills. Additionally, in September this year, the PPF extended their levy bill easement for another year and announced in its 2022/23 levy consultation it expected to collect £415m from its levy payers, a reduction of £105m from the £520m levy estimate in the previous levy year (2020/21).
PPF CEO Oliver Morley says: “Paying £1bn in compensation over the past financial year demonstrates the impact of the protection we provide and the significant difference we make to our members’ lives.”
The PPF protects the financial futures belonging to just under 10 million people from more than 5,300 eligible UK defined benefit (DB) pension schemes, and will compensate them for their lost pensions if their employer fails and their scheme is unable to pay them what they promised.
Morley adds: “Our greatest risk remains the uncertainty around future claims following employer insolvency, especially in this challenging environment. Despite our strengthened funding position, we’re mindful that many of the schemes we protect have substantial deficits which could, if they were to claim, have a material impact on our reserves.”
Lisa McCrory, PPF chief financial officer and chief actuary, adds: “Our priority remains to protect the financial futures belonging to our current and future members, and reduce the burden of future claims on our levy payers.
“Our exceptional investment performance over the past financial year has not only allowed us to improve our funding position and grow our reserves, but has put us in a very strong position to take on future claims that could materialise as a result of the pandemic.
“We hope our strengthened funding position will reassure our current and future members that we continue to be an essential lifeline for them, and we call on trustees of the schemes we protect to remind their members of the vital protection we provide so they know their pensions are protected if the worst were to happen.”