Connected Research

Union policy research in the 21st century

PPF7800 – April

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The Pensions Protection Fund’s Index of the health of defined benefit pension schemes in April shows an improvement on the March position. This is the first month-on-month improvement following a period of ten months of a deteriorating or (in one month) a static situation.

The aggregate funding position of all pensions schemes in the UK (total assets minus total liabilities) was -£188.5bn in April – an improvement on the £242m shortfall recorded in March. Some 87% of schemes – down from 90% in March – are in deficit.

The improvement in the figures stems from rising equity markets adding, on the one side of the equation, some 4% to pension schemes’ asset values, while liabilities, on the other, saw an improvement of 3.2%, partly as a result of the Bank of England’s quantitative easing programme and its impact on gilt yields (against which scheme liabilities are set) – which may be a short-term situation.

The figure is, naturally, much worse than it was a year ago: over the year to April 2009, the FTSE All Share Index has fallen by 29.9% while ten-year gilt yields have fallen by 1.2 percentage points. But the £53.5bn recovery (an improvement of 22%) in one month demonstrates very well the volatility of pension scheme assets and liabilities, as well as the need to take a long-term view.

Nevertheless, the improvement is very welcome even though the factors underpinning it are themselves fragile and subject to further change. Even so, this may be one more of those green shoots we hear a lot of these days!

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Written by Calvin

13/05/2009 at 7:10 pm

Posted in Pensions

Tagged with , ,

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