Today we've published our Annual Report 2022/23. Our Chair, Kate Jones, reflects on the financial year.
Protecting and reassuring those who depend on us is central to everything we do. This responsibility is never more in focus than during periods of economic uncertainty.
At the end of the financial year, as I reflect on the successes and challenges of the past 12 months, it feels like the last few years have been characterised by a different kind of turbulence.
The rising cost of living has made it an exceptionally difficult year for many people, including our members and employees. We have kept this at the forefront of our Board discussions and decisions, as I know the Executive Committee have too. We take our responsibilities extremely seriously. The PPF has weathered the storms again and remains strong and robust, offering stability to those who rely on us year after year, evolving and adapting to the world in which we live.
Our strategy and the way we manage risk help us to make sure we can keep protecting and paying members for decades to come. The review of our funding strategy, which we published last autumn, was an important step in our evolution and a recognition that we’ve moved into a new phase.
Our aim is to lead by example and catalyse the growth of a more sustainable pensions industry. Investing responsibly has always been at the heart of how we manage our investment portfolio, and we firmly believe that this is critical to ensuring sustainable returns for our stakeholders. By taking material environmental, social and governance (ESG) risks and opportunities into consideration, not only in our investments but in all our activities, we aim to protect our assets, our members’ futures and the world around us.
We have already, over the last several years, made tangible progress in many aspects of sustainability. We embed material ESG considerations right across our investments as well as expecting the same from our external managers, from selection through to ongoing monitoring and reporting, as evidenced by the growth over the last few years in the number of our external managers who have become Principles of Responsible Investment (PRI) signatories. We’ve made meaningful progress since beginning our Diversity and Inclusion (D&I) journey in 2018 and have set ourselves ambitious targets. We also look beyond our own operations and our portfolio, embedding sustainability and social value into our procurement and contract lifecycles. The new sustainability strategy brings together all of this as we aim to build on the progress already made and look at the impact of our own operations, our supplier relationships and our impact in the community.
I was very pleased to read the positive feedback on our governance and strategy in the Department for Work and Pensions’ (DWP) review of the PPF. The report was a real validation of our role, effectiveness and maturing as an organisation. We felt proud to be recognised for the value we bring and I personally welcome the encouragement to add further value by taking what we’ve learned to a wider audience. We have learned a great deal throughout the course of our evolution so far, in areas such as investment, customer service and D&I, and are actively seeking to make our learnings available to others in the industry. We are taking forward the review’s recommendation for us to work with the Government to explore opportunities to use our capabilities and skills for wider public benefit.
Sadly, the current cost of living crisis has exacerbated inequalities that exist in the UK, bringing into sharp focus again the need to improve financial literacy across the population. Many children reach adulthood without the skills necessary to manage their own finances, lacking the confidence to budget, avoid debt and navigate the financial product marketplace. There is some great work happening in the industry, including a unique longitudinal study into the impact of financial education at primary school level over seven years, which I will be watching with interest. Much more can be done and the Government has shared its ambition for all pupils to study maths until the age of 18. My hope is that the PPF can go further and use our collective expertise to help raise financial literacy through our new Community Impact programme.
I would also like us to collaborate with others in the industry to do more on financial inclusion, keeping in mind our responsibility to make sure the information we share with pension scheme members is clear, understandable and accessible to all.
The past year saw significant market volatility. The stresses last autumn in the gilts market, which necessitated the Bank of England to intervene, may understandably have caused concern to members of DB schemes. While we remained financially robust, we welcome steps taken since the crisis by the Bank of England and The Pensions Regulator to strengthen the resilience of DB pension schemes. While the impacts on individual schemes will take some time to be fully known, we expect that the increase in gilt yields will have a positive impact on the aggregate funding position of DB schemes. Against this backdrop, we also welcome the renewed focus on the DB Funding Code. It is vital to ensure schemes are appropriately funded in order to reduce risks to members and the PPF, particularly as more schemes reach maturity.
While claims on the PPF have been low over the course of the year, we haven’t become complacent. We’ve worked hard to support schemes where the employer has become insolvent, but the scheme can afford to buy higher benefits than the PPF would pay. Our team works with specialist panel experts to help these schemes progress through the PPF assessment period as seamlessly as possible and help them secure the best possible benefits for members outside the PPF. Earlier this year our team helped the Arcadia pension schemes to agree an £850 million buy-in with Aviva following a period in PPF assessment – an excellent result for the schemes’ 8,800 members.
In closing, I want to thank my colleagues on the Board and the Executive Committee for their care, leadership and commitment to delivering for all of our stakeholder communities. I’d particularly like to thank Rodney Norman, who stepped down from his non-executive role in December 2022, and Anna Troup, who will be stepping down in June 2023, for all they have contributed to the PPF. I am delighted to welcome David Atkinson to the Board. He brings valuable experience in risk and financial services and I look forward to the contribution he will make.
I’d also like to express my thanks to the employees who make the PPF what it is. It is rare to find a more committed and engaged group of people who care about our members and the difference we continue to make in supporting those who look to us to protect their future.
Together we will continue to build on these strong foundations and ensure safer futures for those who rely on us.
Kate Jones is our Chair