PPF 7800 deficit increases by £39bn over month

The combined deficit of schemes in the PPF 7800 index has increased by £39bn over the month of July, according to the Pension Protection Fund.

Publishing the latest figures, the PPF said the deficit at the end of July 2019 was £90.7bn, up from £51.7bn at the end of June 2019. July’s figure is also worse than a year ago, when a deficit of £26.1bn was recorded in July 2018.

The funding level of schemes decreased over the month from 97 per cent to 95 per cent at the end of July 2019. This is also lower than the funding level recorded in July 2018 of 98.4 per cent.

Within the Index, total scheme assets amounted to £1,729.8bn at the end of July 2019. Total scheme assets increased by 2.4 per cent over the month and increased by 6.8 per cent over the year. Total scheme liabilities were £1,820.5bn at the end of July 2019, an increase of 4.6 per cent over the month and an increase of 10.6 per cent over the year.

The aggregate deficit of all schemes in deficit at the end of July 2019 is estimated to have increased to £218.8bn from £189.3bn at the end of June 2019. At the end of July 2018, the equivalent figure was £162.3bn. At the end of July 2019, the total surplus of schemes in surplus decreased to £128.1bn from £137.6bn at the end of June 2019. At the end of July 2018, the total surplus of all schemes in surplus stood at £136.3bn.

The number of schemes in deficit at the end of July 2019 increased to 3,396, representing 62.3 per cent of the total 5,450 DB schemes. There were 3,275 schemes in deficit at the end of June 2019 (60.1 per cent) and 3,196 schemes in deficit at the end of July 2018 (58.6 per cent). The number of schemes in surplus decreased to 2,054 at the end of July 2019 (37.7 per cent of schemes) from 2,175 at the end of June 2019 (39.9 per cent). There were 2,254 schemes in surplus at the end of July 2018 (41.4 per cent).

Commenting on the figures, BlackRock head of UK fiduciary business, Sion Cole, said: “UK pension scheme funding levels fell over July as liabilities increased sharply due to tumbling gilt yields. Ongoing uncertainty around Brexit, particularly following the change of Prime Minister, meant the pound fell and further weakened many UK schemes’ sponsor covenants.

“With geopolitics also continuing to drive markets we saw a largely ‘risk off’ environment. The much-anticipated US rate cut happened at the end of the month, and many expect other central banks such as the ECB to follow suit. In the UK, the 10 year yield fell 21 basis points to finish the month at 0.7 per cent, while longer dated yields also fell around 17 basis points.
“This, in combination with rising inflation expectations, meant UK liabilities finished the month nearly 5 per cent higher than at the end of June,” he stated.

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