A scheme’s s179 liabilities represent, broadly speaking, the premium that would have to be paid to an insurance company to take on the payment of PPF levels of compensation. This compensation may be lower than full scheme benefits.
Highlights
• The aggregate surplus of the 5,131 schemes in the PPF 7800 Index is estimated to have decreased over the month to £441.1 billion at the end of August 2023, from a surplus of £446.1 billion at the end of July 2023.
• The funding ratio decreased from 146.4 per cent at the end of July 2023 to 146.2 per cent.
• Total assets were £1,396.6 billion and total liabilities were £955.5 billion.
• There were 473 schemes in deficit and 4,658 schemes in surplus.
• The deficit of the schemes in deficit at the end of August 2023 was £2.3 billion, up from £2.2 billion at the end of July 2023.
Shalin Bhagwan, PPF Chief Actuary said: “Aggregate funding levels across the DB universe deteriorated slightly over the past month due to a reduction in the value of pension scheme assets. This was offset to some extent by a reduction in liabilities arising from a rise in yields. During the month, yields on long-dated gilts briefly reached levels seen during last year’s market turmoil. This time though, markets remained orderly and the spike in yields quickly reversed.
Anecdotal evidence suggests that some pension schemes took the opportunity to add to their holdings of gilts, but that, in aggregate, funding level gains of the last 12-18 months haven’t been accompanied by the same level of interest rate and inflation hedging activity as similar gains would have prompted in the past. This is perhaps unsurprising as pension schemes seek to review their funding, investment and governance arrangements following the stress in the leveraged LDI market.
Whilst the estimated aggregate funding position continues to show a surplus, it should be noted that approximately 10% of DB pension funds are in deficit and some of these may not be able rely on their sponsor covenant.”
View the September update and see the supporting data on the 7800 Index for 31 August 2023 here: The PPF 7800 index | Pension Protection Fund .
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