The combined deficit of schemes in the PPF 7800 Index remained almost unchanged over November, falling just £0.1bn month-on-month.

The aggregate deficit of the 5,588 schemes in the Index decreased to £87.6bn at the end of November from £87.7bn at the end of October 2017. With this the funding level remained the same as at the end of October 2017 at 94.7 per cent.

The PPF also reported that total scheme assets were £1,563.5bn up from £1,543bn at the end of October 2017. Total liabilities were £1651.1bn, down from £1692.8bn at the end of the previous month.

Of the schemes in the index, there were 3,663 schemes in deficit and 1,925 schemes in surplus at the end of the month.

This month the PPF updated the way in which the PPF 7800 Index is calculated. It explained it is moving to the Purple Book 2017 dataset for the calculation of the funding levels, re-stating the funding position from March 2017 to October 2017 to reflect the new data. The impact as at 31 October 2017 is an improvement in the funding position of 3.5 percentage points.

BlackRock head of UK strategic clients Andy Tunningley: “The arrival of snow and the UK’s big freeze is a timely reminder: it can be hard to get things done for those not well prepared. Funding levels of UK pension funds froze in November, with the PPF 7800 Index chilling at 94.7 per cent - exactly the same as the previous month. There was little movement in UK government bond yields over the month, and regional equity market indices had mixed performance; the UK, European and Emerging market indices all closed the month lower than they started, though world equities were modestly up overall.

“For underfunded mature schemes; the challenge is particularly stark – how should they juggle near-term cashflow needs – required to pay today’s pensioners now - with long-term return objectives – required to improve the security of the benefits of future pensioners?

“In our view, the answer is a holistic approach to portfolio construction – a framework that considers cash outflows, income, risk and return in combination, rather than prioritizing one of those objectives. We think combining traditional liability hedging assets with well-chosen corporate credit, private assets, and a diversified growth portfolio can achieve this.

"Underfunded schemes with excessive or insufficient allocations to any of these asset groups can suffer in adverse scenarios. In particular, schemes should beware of investment strategies that prioritise cashflow generation but compromise risk or return objectives – i.e. ‘cashflow for the sake of cashflow’. Locking into poor investments, whether or not they provide cashflow, runs the risk of schemes seeing their deficits snowballing. A balanced approach is better for thawing the sizeable deficits that schemes are facing this winter and beyond.”

Last week the PPF published its annual Purple Book 2017, which found that the recovery plan length for private DB schemes has dropped to 7.5 years, the lowest period recorded since records began in 2005/06.

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