Connected Research

Union policy research in the 21st century

PPF7800 Index – August update

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The Pensions Protection Fund has produced its August update of the aggregate pensions deficits of all defined benefit schemes covered by the PPF levy – a total of around 7,400 schemes.

The figures are based on data supplied in respect of s.179 of the 2004 Pensions Act. This requires every eligible scheme to undertake a Pension Protection Fund valuation to establish the level of the scheme’s assets and liabilities in order to set the amount of the levy which is payable to the Fund. The valuation figures supplied are in respect of the 2008-09 levy, so are up-to-date. They are not an authoritative statement of the total liabilities of pension funds, since the valuation is geared only towards what would need to be paid to an insurance company to take on PPF levels of compensation, but do provide an interesting picture as regards the trends over time in the funding of pension schemes and the contribution to the overall level of volatility played by short-term variations in the stock market.

The August update indicates that the aggregate deficit of pension schemes as at the end of July (the monthly figures are stand-alone snapshot ones and are not cumulative) stood at just over £158bn. This represents a considerable improvement on the June figure, where the deficit stood at a fraction over £200bn. The deficit is still sizable – but the quantity of the movement in one month (an improvement of 21% in the month) is also well worth noticing.

Some 85% of defined benefit pension schemes are currently in deficit, a small improvement on the June figure.

The total assets under the command of pension schemes now stands at some £798.3bn (a 3.5% improvement in the month, owing largely to improvements in share prices) compared to a s.179-based assessment of liabilities, which stands at £956.4bn (a 1.5% decrease, owing largely to higher yields on gilts). Over the year to July, assets have fallen by 1.6% while liabilities on this basis have expanded by 15.2%.

A look at the shifting nature of the aggregate picture of pension schemes assets and liabilities over the last three years looks as follows:

PPF7800 August

The current situation looks bad. And it is. But, the overall position is no longer growing worse; the position over the last month represents a substantial improvement; and the key message to note is the volatility of schemes’ funding positions. Don’t panic remains the watchword when it comes to the funding of pension schemes and you can take your inspiration there either from Corporal Jones or Douglas Adams…

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Written by Calvin

13/08/2009 at 2:19 pm

Posted in Pensions

Tagged with , ,

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