PPF 7800 deficit soars to £459.4bn in August

The PPF 7800 deficit grew by £82.6bn in August, causing its funding level to fall to just over 76 per cent.

The aggregate deficit of the 5,945 schemes in the PPF 7800 Index is estimated to have risen over the month to £459.4bn at the end of August 2016, from £376.8bn at the end of July. The position has significantly worsened from the previous year which recorded a deficit of £233.2bn at the end of August 2015.

The funding ratio continued to fall from 79.2 per cent to 76.1 per cent.

The PPF’s total assets were £1,458.7bn and total liabilities were £1,919.1bn. There were 5,042 schemes in deficit and 903 in surplus.

The total number of schemes in deficit, now represent 84.8 per cent of the total 5,945 DB schemes.

Commenting on the worsening aggregate funding level within the PPF, Redington head of defined benefit Dan Mikulskis said: “The UK pension funds’ summer of discontent continues as fresh PPF figures paint a grim picture for many pension funds, especially those with low liability hedge ratios.”

“The primary driver has been gilt yields falling by around 30bps over the month of August, as the Bank of England cut interest rates and announced further QE amid a deteriorating picture for growth. The yield fall has increased the liabilities, and widened the aggregate deficit.

“However, this picture will not necessarily be replicated within each individual pension fund – as the investment strategy and hedging (which vary quite widely between funds) will be the main driver at the individual pension fund level.”

“The current pensions landscape has emphasised how important managing pension risk is to the health of a scheme sponsor,” Mikulskis added.

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