Sinead Leahy, Managing Director & Client Director, Cardano said: “Although it paints a positive picture of a maturing DB landscape, the PPF’s latest data shows a bygone era before the mini-budget and the crisis that followed. We know there were winners and losers in the last couple of months and some schemes saw their funding levels impacted as hedges were lost. These recent events are a stark reminder of the risks pension schemes can still bring to sponsors.
“Management teams and trustees must now challenge both whether further funding is actually still required but also how investment strategies should be updated. LDI still plays an important role in protecting the funding ratios shown in the Purple Book but, as the latest guidance from the Pension Regulator suggests, it is crucial schemes achieve and maintain an appropriate level of resilience in levered LDI mandates and improve operational governance.”
Emily Goodridge, Managing Director, Cardano Advisory said: “The rate of insolvencies for the PPF universe fell to a historical low of 0.24% in the year to March 2022 and the PPF is projecting relatively modest new claims in the coming years. However, given the current economic challenges, now is not the time to be complacent about covenant risks; even members of well-funded schemes can suffer a shortfall if their sponsor fails. It is likely that “PPF+” solutions for schemes of distressed employers will be a hot topic in 2023.”
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