The Pension Protection Fund (PPF) has revised its figures on the state of the finances of DB schemes.
These show a lower overall level of estimated buyout funding for UK DB schemes, from 112 per cent in 2023 to 94.4 per cent in 2024. These figures are contained in its annual ‘purple book’.
LCP partner, and former pensions minister Steve Webb has said these figures do not necessarily show that marked change in the financial stability of these schemes.
He adds that these latest figures reflect a change in the method used to estimate funding positions, rather than an actual reduction in scheme funding. He also points out that DB funding is in a much more robust position than it was a decade ago.
He points to other data sources which confirm a sharp improvement in scheme funding.
This includes data from company accounts which show the ‘best estimate’ of pension scheme balances. LCP’s latest ‘accounting for pensions’ report showed a combined surplus of the FTSE-100 companies’ pension schemes of £42bn at 31 December 2023; this compared with a deficit of over £30 bn a decade earlier.
Meanwhile the volume of activity in the de-risking market has surged in recent years in light of the sharp improvement in scheme funding. Again LCP’s 2024 report on the risk transfer market found that 2023 was a record year for transactions with nearly £50 billion in scheme assets being transferred to insurers as part.
Even the PPF’s own figures show a marked improvement in estimated buyout funding for UK DB schemes from a funding level of 67 per cent a decade ago to the latest estimate of 95 per cent.
Webb says: “Although these are big revisions to the figures, it is important that we don’t draw the wrong conclusions about what has been happening to DB scheme funding in the last decade.
“The overwhelming story remains one of dramatic improvement in overall scheme funding as evidenced by a range of data sources which have not changed. This includes data from company accounts and the evidence from transactions in the de-risking market. The overall funding position of most DB pension schemes is significantly better than a decade ago and today’s statistical revisions do not change that fact.”