PPF 7800 surplus falls by £36.6bn in July

The aggregate surplus of defined benefit (DB) pension schemes protected by the Pension Protection Fund (PPF) has decreased by £36.6bn to £62.4bn in July, according to the PPF 7800 Index.

The lifeboat said that the overall funding ratio of the schemes decreased from 105.8 per cent at the end of June 2021 to 103.5 per cent during the period.

Total assets were estimated to stand at £1,849.7bn and total liabilities were pegged at £1,787.3bn.

At the end of July, 2,600 schemes were in deficit and 2,718 schemes in surplus, with the deficit of the schemes in deficit standing at £142.2bn, up from £117.7bn a month beforehand.

PPF chief finance officer and chief actuary, Lisa McCrory, said: “Over the past month we’ve seen a slight decrease in the aggregate funding position for the 5,318 UK DB pension schemes we protect. This is due to a fall in bond yields, which saw the funding ratio decreasing by 2.3 percentage points to 103.5 per cent.

“The number of schemes in deficit increased marginally to 2,600, and the total shortfall of these schemes increased by £24.5bn to £142.2bn. This increase highlights the ongoing risk to the PPF and how sensitive scheme funding is to yield changes.”

Buck UK head of retirement consulting, Vishal Makkar, commented: “July was another positive month for the schemes following a tumultuous period over the last year, with the aggregate funding position remaining well in surplus. While yields drifted downwards slightly, strong asset returns cancelled out the impact of this, as both assets and liabilities increased slightly over the course of the month.

“With many DB schemes in an apparently more stable and comfortable position than they have been in for some time, some trustees may be starting to turn their attention to other targets.

"The publication this week of the latest report from the Intergovernmental Panel on Climate Change has thrown the need to confront climate change to the forefront of the public conversation.

“The urgency of environmental, social and governance (ESG) issues is even more pressing for schemes with over £5bn in assets, which will be required to make new TCFD disclosures from the start of October.

“DB schemes of all sizes should see this is an opportunity to ensure that they are managing their climate risk, making appropriate plans and giving these challenges the attention they deserve.”

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