Connected Research

Union policy research in the 21st century

PPF Index for January

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The Pensions Protection Fund has updated its Index of the collective health of the UK’s 7,400 or so defined benefit pension schemes.

The latest figures (for January) are that the total deficit has widened over the course of the month to £51.9bn, from £32.6bn at the end of December. Some 75% of schemes are in deficit. The reasons for the drop are almost exclusively to do with falling asset values as a result of lower equity prices (particularly over the last week or so in the month); the total value of liabilities having remained almost static. The size of the deficit compares with a total asset base of £859.6bn (thus giving total liabilities of £911.5bn) – so it remains the sort of figure which is well within manageable limits.

Last week’s suspension of the Bank of England’s quantitative easing programme should result in improved prospects for liabilities since gilt yields – which is used to measure the current value of scheme liabilities – should now start to rise as a result. After a rally during early February, equity prices have continued their falling trend, indicating that asset values are – at least this point in the month – still falling. The resumption of the decline in the stock market coincided with the suspension of quantitative easing, leading some to question whether there was a direct link between the two and, indeed, the overall effects of the programme. Others have also wondered whether this may be the start of a mini-slump – or even a ‘double dip’.

For pensions, the good news on the one hand thus looks likely to be counterbalanced by bad news on the other. Well, ’twas ever thus…

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Written by Calvin

09/02/2010 at 4:49 pm

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