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  • January 2014
01

PPF DB pension deficits fall to £27.6bn

Open-access content Tuesday 14th January 2014 — updated 5.13pm, Wednesday 29th April 2020

The aggregate deficit of the UK’s defined benefit pension schemes more than halved last month, according to figures published today by the Pension Protection Fund

The PPF's latest monthly update of its PPF 7800 Index revealed that the 6,150 schemes eligible for protection had an overall estimated deficit of £27.6bn at the end of December 2013, down from £59.7bn at the end of November. 

There was also a fall in the number of scheme in deficit, down from 3,952 at the end of November to 3,701 (60.2%) at the end of December. Correspondingly, the number of schemes in surplus increased to 2,449 (39.8%), up from 2,198 at the end of November.

And the aggregate value of surpluses increased to £79.4bn from £68.7bn at the end of November 2013.

There has also been a great improvement in the funding ratio, which measures scheme's assets as a percentage of their liabilities. The ratio climbed from 95% in November 2013 to 97.6% in December. Total assets of the schemes on the index were largely unchanged from the previous month, at £1.13 trillion, with liabilities standing at £1.25trn. 

Rising equity markets and gilt yields are the main drivers of improved funding levels, the PPF 7800 Index report stated. 

It said higher nominal and index-linked gilt yields drove liabilities down by 2.7% in December.

Commenting on the PPF's figures, John Ball, head of UK Pensions at actuaries Towers Watson, said: 'This shows how volatile pension deficits can be, but it's not quite such good news as it looks.  Precisely what you are measuring and how you measure it can make a big difference to estimates of pension deficits.

'The dramatic improvement in the PPF numbers is not a story that will be recognised by companies putting the finishing touches to their 2013 accounting disclosures. Higher anticipated inflation makes more difference to the cost of paying full benefits than it does do to PPF compensation, and corporate bond yields did not rise in tandem with gilt yields during 2013.'

He added that deficits in company accounts should typically have gone up during 2013.
 

This article appeared in our January 2014 issue of The Actuary.
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