On the go: The Pension Protection Fund’s reserves fell to £6.1bn from £6.7bn, according to its latest annual report published today, the result of a record claim from the Kodak Pension Plan No 2.
The lifeboat’s funding ratio also dropped by 4.2 percentage points to 118.6 per cent, although its accounts show that it remains on course to reach its funding objective, with an 89 per cent probability of success – down from 91 per cent in 2018.
The PPF also reported strong investment performance. Despite market volatility, its investment return in the year to March 31 2019 was 5.2 per cent, up from 3.2 per cent for the previous year, and its assets under management grew from £30bn to £32bn.
A liability-driven investment programme has dampened the fund’s exposure to changes in interest rates and inflation, while the largest contributors to performance over the past year were infrastructure, real estate, public equity and its hybrid allocation. Emerging market debt proved to be one of the few markets contributing negatively.
Andy McKinnon, chief financial officer at the PPF, said: “Our reserves mean that we currently have £6.1bn over and above what we need to pay our members and their dependants for the rest of their lives. We need these reserves to cover future claims, and we had anticipated the KPP2 claim.
“But despite having a buffer we are not complacent,” he added. “Our biggest risk is the funding level of the schemes we protect and scheme deficits remain high.”
As well as beating its targeted three-year investment returns, during 2018-19 the PPF successfully insourced the Financial Assistance Scheme and achieved high member satisfaction scores, averaging 97 per cent.
PPF chief executive Oliver Morley said: “The 10.4m members of defined benefit pension schemes can be reassured of our protection. We now have around 400,000 members, and a further 150,000 members of schemes in PPF assessment.
“Our steady investment and funding approach over the coming years will help us to make sure we can provide a secure retirement for all our current and future members.”
Mr Morley added: “We expect challenging times ahead, but we are confident our funding strategy is on course to see us through them.”
The report in full can be found at https://ppf.co.uk/annual-report.
