On the go: The aggregate surplus of the 5,318 schemes in the PPF 7800 Index remained “solid” in October, narrowing to £103.2bn from £108.8bn at the end of September, while the funding ratio decreased to 105.9 per cent from 106.4 per cent during the same period.
Vishal Makkar, head of retirement consulting at Buck, said the data are positive for defined benefit pension schemes given the deficit fell to 91.2 per cent in 2020.
“The aggregate funding positions of the schemes in the PPF Index remained solid over the course of October, meaning that UK DB schemes look set to end this year in a strong position,” he said.
Total assets for the schemes within the index stood at £1.84tn in October, with total liabilities at £1.74tn. More schemes were in surplus than in deficit during the month, at 2,916 and 2,402 schemes respectively.
However, the deficit of the schemes in deficit rose by 8 per cent to £118.2bn in October, from £109.4bn in September.
Commenting on the data, Lisa McCrory PPF chief finance officer and chief actuary, said the data still highlighted the investment risk schemes face.
“While this marginal decline in the aggregate surplus is mainly due to a decrease in bond yields, it’s a reminder of the ongoing volatility in scheme funding levels and the risk the schemes we protect pose on our reserves and funding position,” she said.
Makkar said a subdued Autumn Budget, with few notable pension announcements, has allowed schemes to focus on long-term issues.
“Schemes should take advantage of this period of policy consistency and relative funding security to invest time and energy into other issues and more long-term projects,” he added.
“These include concerns around rising inflation, as well as a potential increase in the Bank of England’s base rate, which need to be factored into schemes’ contingency planning. In terms of governance and administration, COP26 has thrust the [environmental, social and governance] obligations faced by schemes to the fore.”
