PPF 7800 deficit increases by £21.1bn over February

Written by Natalie Tuck

The PPF 7800 deficit increased by £21.1bn over February, to £72.1bn up from £51bn in January, the Pension Protection Fund has revealed.

Despite this, the position is still an improvement from February 2017 when a deficit of £242bn was recorded. The funding level of schemes decreased over the month from 96.9 per cent to 95.6 per cent at the end of February 2018. However, itis higher than the 86.2 per cent recorded in February 2017.

The number of schemes in deficit at the end of February 2018 increased to 3,608, representing 64.6 per cent of the total 5,588 defined benefit schemes. There were 3,493 schemes in deficit at the end of January 2018 (62.5 per cent) and 4,380 schemes in deficit at the end of February 2017 (75.6 per cent).

Within the Index, total scheme assets amounted to £1,567.5bn at the end of February 2018, a decrease of 0.5 per cent over the month. Total scheme liabilities were £1,639.6bn at the end of February 2018, an increase of 0.8 per cent over the month and a decrease of 6.5 per cent over the year.

The aggregate deficit of all schemes in deficit at the end of February 2018 is estimated to have increased to £187.6bn from £174.2bn at the end of January 2018. At the end of February 2017, the equivalent figure was £307.4bn.

At the end of February 2018, the total surplus of schemes in surplus decreased to £115.5bn from £123.2bn at the end of January 2018. At the end of February 2017, the total surplus of all schemes in surplus stood at £65.3bn.

Commenting on the results, BlackRock head of UK strategic clients Andy Tunningley said: “Weaker equity markets eroded pension scheme asset values and resulted in lower funding levels, while UK bond yields finished roughly flat.

"During February, bond markets lost the momentum that has driven yields higher since the turn of the year; geopolitical tensions and softer activity data took the wind out of the bond market’s sails. Whilst we expect yields to rise further over coming months and years, we think progress will be slow, with bumps and setbacks along the way, meaning pension schemes cannot rely on rising yields to meet their funding level objectives.

“Although the PPF funding level aggregate has improved greatly over the last 12-18 months, from around 80 per cent to 95 per cent, there is still further to go. Coining an analogy used by Chancellor Hammond to describe the UK’s budget deficit ahead of the Spring Statement later today; there is light at the end of the tunnel, but we are still in the tunnel.”

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