On the go: The Pension Protection Fund is encouraging trustees to have a contingency plan in place for sponsor insolvency, as the PPF 7800 index decreased for the first time is six months.
The aggregate surplus of the 5,215 defined benefit schemes monitored by the pensions lifeboat dropped by £13.6bn in July, standing at £254.3bn, which compares with £267.9bn in June.
Section 179 liabilities, the level of assets needed to secure PPF-level benefits with an insurer, were 118.2 per cent funded in July, down from 120.1 per cent in the previous month.
By the end of the month, total assets in DB schemes stood at £1.7tn, while total liabilities were £1.4tn. There were 1,490 schemes in deficit and 3,725 schemes in surplus, the PPF stated.
The aggregate shortfall of the schemes in deficit at the end of July was £29.8bn, up from £25.3bn in the previous month.
PPF’s chief finance officer and chief actuary Lisa McCrory said this is the first time in six months the funding position for the 5,215 schemes has declined, which is “the result of a fall in bond yields as markets anticipate the recent central bank tightening cycles may be drawing to a close”.
“While the aggregate surplus for the PPF 7800 Index remains positive, the economic outlook remains uncertain, with the risk of an uptick in the rate of corporate insolvencies.
“We encourage trustees, even if their funding position is strong, to have contingency planning for employer insolvency in place.”
Buck head of retirement consulting Vishal Makkar noted that it is “not all plain sailing for trustees”.
“We’ve seen further recent rises in both inflation figures and the Bank of England’s base rate, as concerns about the cost of living dominate the news agenda.
“The uncertain economic climate is just one cause for concern though, and many trustees, particularly at smaller schemes, may have worries about upcoming regulatory changes too,” he said, referencing the consultation on DB funding published in July.
