PA Spring Conference: PPF at 'interesting juncture' amid funding strategy review

The Pension Protection Fund (PPF) is at a “really interesting juncture” in how its funding strategy will evolve, according to PPF head of actuarial levy and policy, Jay Khimji.

Speaking at the Pensions Age Spring Conference 2022, Khimji confirmed that the lifeboat is currently undertaking a stakeholder engagement programme to support its ongoing strategy review, highlighting this as “a really interesting juncture in considering how [its] funding strategy will evolve in the future”.

The PPF previously reported a probability of success of 95 per cent, which Khimji noted was ahead of its 90 per cent target, prompting a review of the funding strategy, which will take into account all factors.

He stated: "We are approaching a key milestone in our journey, the growth in our reserves means we would be decently well placed to withstand potentially high levels of claims from schemes, without risking the security of our members benefits.

“However, whilst this all feels like good news, it’s important to remember that there are still today schemes out there with very large deficits, and there’s potential for economic and geopolitical headwinds.

“Indeed, a year ago, in 2020, our probability of success of 83 per cent was the lowest It had been since we started measuring it in 2010, so it’s important we look at all factors.”

During the session, Khimji also discussed the PPF’s new rules for alternative covenant schemes, which have their levy calculated in a different way to other schemes to reflect that the main risk posed by these schemes is investment risk, rather than a failure of a corporate business.

Whilst Khimji acknowledged that there are not many, if any, scheme’s falling into this definition yet, he emphasised the need for the PPF to recognise the potential for the market to evolve in this way.

“At this point it’s hard to judge what form those innovations will take, so what's most important for us is that we are monitoring developments and we are engaged with what's happening in the market,” he added.

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