DB pension surplus falls by £12.8bn in February

The aggregate surplus of the 5,215 defined benefit (DB) schemes in the Pension Protection Fund (PPF) 7800 Index declined from £146.4bn to £133.6bn on a section 179 basis in February.

The update showed that total assets fell from £1,757bn to £1,732.2bn, although this was partially offset by liabilities decreasing from £1,610.6bn £1,598.6bn.

It also showed a decrease in the funding ratio from 109.1 per cent to 108.4 per cent in February, with 2,172 schemes in deficit and 3,043 in surplus.

The aggregate deficit of the schemes in deficit at the end of February 2022 was £83.1bn, up from £80.9bn at the end of January 2022.

PPF chief finance officer and chief actuary, Lisa McCrory, commented: “While the aggregate funding position for the 5,215 DB schemes we protect remains positive overall, a fall in global equity assets, offset by an increase in most bond yields, has seen the aggregate surplus fall to £133.6bn.

“This also means more schemes are in deficit with an increased aggregate deficit of £83.1bn.
“Although the change at an aggregate level is small, the impacts on some individual schemes may be more significant.”

Buck head of retirement consulting, Vishal Makkar, added: “The aggregate surplus of the schemes in the PPF Index fell slightly in February, as both liabilities and asset values dropped by similar amounts.

“This may well be the calm before the storm though, and there could soon be more volatility on the way, as Russia’s invasion of Ukraine continues to impact global markets.

“Investment markets have already experienced serious turmoil and it’s still difficult to predict what the likely long-term effects might be.

“There is, however, still plenty of trustees to do in the meantime. Newly published guidance from The Pensions Regulator has set out a clear list of concerns, from the potential impact of sanctions to an increased risk of cyber-attacks, financial crimes, and scams.

“In the shorter term, stretched supply chains, rising commodity prices and high inflation will be impacting many sponsors as well as the stock markets.

“Many scheme members may have concerns as well and trustees will certainly have to grapple with the consequences of the current conflict for some time to come. For any trustees who are unsure about the best course of action, speaking to a trusted adviser can be a helpful place to start.”

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