There was a clear decrease on long-term risk to the Pension Protection Fund between the end of March 2010 and the end of March 2011, according to the latest version of the Purple Book published yesterday by the fund and the Pensions Regulator.
But, the book - which focuses on the risks faced by the predominantly private sector defined benefit pension schemes in the UK - warned that the slowdown in the global and UK economies since then could have a negative impact on the PPF.
In particular, the book highlights sharp drops in 'core' government bonds, such as US Treasuries, bunds and gilts, which, it said, meant scheme funding for PPF-eligible direct benefit pension schemes 'deteriorated markedly' between the end of March and end of December 2011.
Using Long-Term Risk Model projections, as of March 2011 the PPF was forecast to have an 87% probability of meeting its aim of becoming self-sufficient, compared to 83% a year earlier. Self-sufficiency would involve the fund being fully funded, with zero exposure to market, inflation and interest rate risk, as well as protection against claims and longevity risk.
The book - which focuses on risk at the end of March 2011 and also takes into account developments until the end of 2011 - covers 6,432 schemes with a total membership of 12 million.
Of them, the proportion of open schemes continues to fall - down from 18% in 2010 to 16% in 2011, while the share of schemes whose principal sponsor is in the manufacturing sector continued to fall, and the proportion of schemes based in the services sector continued to increase.
Schemes assets totalled £968.5bn as of 31 March 2011, with a deficit of £1.2bn. The most assets and liabilities are held by two sectors - finance, insurance and real estate, and manufacturing.
However, in general terms, the book reports a variation - albeit 'less marked' - of most of the asset allocation trends seen in recent years, such as a falling equity share and a rising share in hedge funds and 'other investment'.
There was a drop in the number of schemes or sections of schemes entering a PPF assessment in a particular quarter - down from an estimated 50 in the first quarter of 2009 to 28 by the second quarter of 2011.
But, the level of schemes entering assessment in the year to the first half of 2011 was still higher than in the two years leading up to the recession.
As of March 31 2011, there were 268 schemes, with 225,000 members between them, in a PPF assessment, compared to 271 with 209,000 members in total a year earlier.
The aggregate assets of schemes in assessment totalled £9.5bn and their liabilities £10.9bn. Schemes with smaller liabilities - below £5m - represent a larger proportion of those in assessment in relative terms compared to their proportion of the total dataset included in the Purple Book.
Manufacturing schemes also figured significantly - with the sector's sponsors representing 46.2% of all schemes in assessment, compared to the 30.7% of PPF eligible schemes with manufacturing sponsors. This in itself is significantly more than manufacturing's 12% share in the UK economy.
As of the end of March 2011, 33,069 scheme members were in receipt of PPF compensation - up from 20,775 the previous year. The PF paid out £119.5m in compensation in 2010/11, continuing the steady increase from the £1.4m it paid out in 2006/07, its first year making compensation payments.
.
