The Pension Protection Fund (PPF) has today reported a healthy financial position in its 2016/17 Annual Report and Accounts, in what has been an eventful year for pensions, including debate around the BHS pension scheme and a Green Paper on the future of defined benefit pensions.
The figures show a strong year for the PPF in the financial markets with invested assets up from £23.4 billion to £28.7 billion. As a result of good investment performance and lower than expected claims, the PPF’s funding ratio has increased to 121.6 per cent, up from 116.3 per cent last year.
Alan Rubenstein, Chief Executive of the PPF, said: “The last year has been full of significant developments in the world around the PPF. We’ve had a successful year and we continue to make steady progress towards our strategic objectives. Members can be reassured by the protection the PPF provides.
“However, we are not complacent as we continue to face large deficits in the schemes we protect.
“Our robust strategy has put us in a good position to manage the uncertainties ahead and our long-term risk model predicts that we will achieve financial self-sufficiency by 2030 in 93 per cent of scenarios.
“Our reserves help protect the long-term sustainability of the fund, allowing us to meet future claims, however the current figure remains modest relative to the net deficit of the schemes we protect, which stood at £226.5 billion at the end of March.”
Arnold Wagner, the PPF’s Chairman, said: “We are now an established part of the pensions landscape, and members of defined benefit pension schemes in the UK can be reassured that we will protect their financial future should their employer fail.
“It’s easy to forget that until the PPF was set up people who worked all their lives to build up their retirement savings could have been left with nothing when their employer went bust. If a scheme enters the PPF, its members will get more than the scheme’s assets could have otherwise provided. If a buyout can provide higher than PPF levels then that is a good outcome – but if members receive PPF compensation, that should not be described as a bad result for their pension.”
The PPF’s Funding Strategy Update will be published later in July.
Notes to editors
· The number of schemes that transferred during the year is slightly higher than the previous year, although the value of claims is lower – 62 new schemes brought combined claims of £252 million compared to £476 million in 2015/16. Over the year, 12,000 members transferred to the PPF, bringing the total number of members to 235,000. Of those, just over half, 128,000, are currently in receipt of compensation. Since the PPF was first set up in 2005 it has taken on 894 schemes and paid £3 billion in compensation.
· The Annual Report and Accounts shows that the PPF’s investment strategy has performed well. The LDI programme continued to match the inflation and interest rate sensitivity of the PPF’s liabilities, while the return-seeking portfolio had a particularly successful year. Over the last three years, the PPF’s assets have outperformed liabilities by an average of 3.3 per cent, representing an annualised outperformance of 1.0 per cent over the PPF’s investment target. This investment performance has seen reserves rise from £4.1 billion to £6.1 billion.
· The Pension Protection Fund protects millions of people throughout the UK who belong to defined benefit pension schemes. If their employers go bust, and their pension schemes cannot afford to pay what they promised, the PPF will pay compensation for their lost pensions. Over a hundred thousand people now receive compensation from the PPF and hundreds of thousands more will do so in the future. The PPF is a public corporation, set up by the Pensions Act 2004, and is run by an independent Board.
For further press information contact:
The PPF Press Office
0207 566 9775