PPF 7800 deficit falls to £149.8bn over October

Written by Natalie Tuck
14/11/17

The combined deficit of schemes in the PPF 7800 Index has dropped to £149.8bn over October, the Pension Protection Fund has revealed.

It is a fall of £8.2bn, down from £158bn, at the end of September 2017. The position has also improved from the previous year, when a deficit of £275.9bn was recorded at the end of October 2016.

Furthermore, the funding ratio of schemes increased over the month from 90.6 per cent to 91.2 per cent at the end of October 2017. The funding ratio is higher than the 84.1 per cent recorded in October 2016.

Within the index, total scheme assets amounted to £1,543bn at the end of October 2017. Total scheme assets increased by 1.2 per cent over the month and increased by 5.7 per cent over the year. Total scheme liabilities were £1,692.8bn at the end of October 2017, an increase of 0.6 per cent over the month and a decrease of 2.5 per cent over the year.

In addition, the aggregate deficit of all schemes in deficit at the end of October 2017 is estimated to have decreased to £235.9bn from £240.5bn at the end of September 2017. At the end of October 2016, the equivalent figure was £327.9bn.

At the end of October 2017, the total surplus of schemes in surplus increased to £86.1bn from £82.5bn at the end of September 2017. At the end of October 2016, the total surplus of all schemes in surplus stood at £52bn. The number of schemes in deficit at the end of October 2017 decreased to 4,030, representing 69.6 per cent of the total 5,794 defined benefit schemes. There were 4,079 schemes in deficit at the end of September 2017 (70.4 per cent) and 4,566 schemes in deficit at the end of October 2016 (78.8 per cent).

The number of schemes in surplus increased to 1,764 at the end of October 2017 (30.4 per cent of schemes) from 1,715 at the end of September 2017 (29.6 per cent). There were 1,228 schemes in surplus at the end of October 2016 (21.2 per cent).

Commenting BlackRock head of UK strategic clients Andy Tunningley said: “Over Halloween, the PPF 7800 Index funding level creeped and crawled marginally higher, from 90.6 per cent at end September to 91.2 per cent at end October 2017. The frightening prospect facing pension funds is that it’s going to take more than central bank hocus pocus to make things much better. Indeed, those hoping that the decision by the Bank of England to increase interest rates at the start of November, for the first time in over a decade, would improve matters were in for more of a trick than a treat – yield levels are broadly unchanged following the announcement.

“The bigger moves for UK yields came in September, when the Bank signalled a potential interest rate rise; by November markets had already discounted the announcement. The recent rate rise only takes yields back to where they were prior to the Brexit vote last year. September‘s signposting by the Bank, which came as a surprise to many, was consistent with our view that UK interest rates will be higher than the market is expecting in around 5 years’ time.”

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