DB pension deficit decreases to £174.8bn - PPF 7800

The combined deficit of UK defined benefit (DB) pension schemes in the Pension Protection Fund (PPF) 7800 Index fell to £174.8bn at the end of June 2020, down from the £176.3bn reported in May 2020.

Whilst the index showed a month-on-month improvement, it clarified that the position had worsened from a year ago, with a deficit of £23.3bn record at the end of June 2019.

The deficit was also over £100bn higher than it was at the start of the year, when a deficit of £35.4bn was recorded.

The funding ratio has increased from 90.9 per cent at the end of May 2020 to 91 per cent, although this is again lower than the 98.6 per cent ratio recorded in June 2019.

Total scheme assets increased by 0.3 per cent over the month to £1,775.5bn, representing a 7.5 year per cent increase over the year.

However, total scheme liabilities increased by 0.2 per cent over the month to £1,950.3bn, an increase of 16.4 per cent over the year.

Over the past month, four schemes shifted from a deficit to a surplus, bringing the number of schemes in the index in deficit to 3,617, representing 66.7 per cent of DB schemes.

The aggregate deficit for schemes in deficit has subsequently decreased to £288bn, down from £290.1bn at the end of May 2020.

However, the total surplus of schemes in surplus has decreased by £0.6bn over the month to £113.2bn.

Commenting on the findings, Blackrock head of UK fiduciary business, Sion Cole, said: "The average pension scheme still has a way to go to get back to the funding levels seen at the end of 2019.

"That said, there is much variation around this and schemes which have a fiduciary manager have typically fared much better.

"The first half of this year has emphasised the need to be agile to navigate market movements during periods of volatility.

"No doubt this has contributed to the surge of pension schemes considering using a fiduciary manager as they reassess their investment strategies, objectives and governance models."

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