DB pension surplus falls £ 5.6bn


The aggregate defined benefit pension surplus (DB) declined for the first time since July last month from £ 108.8 billion to £ 103.2 billion, according to the Pension Protection Fund (PPF) 7800 index.

The coverage ratio fell from 106.4 percent at the end of September to 105.9 percent at the end of October.

A decline in bond yields was the main reason for the “marginal decline” in the surplus.

Assets rose £ 43.1bn to £ 1,844bn over the month, although this was more than offset by liabilities, also increasing £ 48.7bn to £ 1,740.8bn.

The number of deficit systems rose from 2,383 to 2,402 in October, with the overall deficit of these systems increasing from £ 109.4 billion to £ 118.2 billion.

“This month, the total surplus of the 5,318 systems we protect has fallen to £ 103.2 billion for the first time since July,” commented Lisa McCrory, chief finance officer and chief actuary of PPF.

“We have also seen that the number of deficit systems increased from 2,383 to 2,402 and their overall deficit increased by £ 8.8 billion to £ 118.2 billion.

“While this small decrease in total surplus was mainly due to a decline in bond yields, it is a reminder of the persistent volatility in the funding levels of the systems and the risk that the systems we are protecting pose to our reserves and funding position.”

Vishal Makkar, UK Head of Pension Advisors Buck, added: “The aggregate funding positions of the systems in the PPF Index remained solid through October which means UK defined benefit systems are expected to finish in a strong position this year. The coverage ratio at the end of last month fell only slightly to 105.9 percent and was thus well above the 91.2 percent measured at that time in 2020 and the 94.4 percent in 2019.

“The autumn budget, which provided little in the way of announcements about pension policy, gave the trustees another respite. Programs should use this period of political coherence and relative funding security to invest time and energy in other issues and longer term projects.

“These include concerns about rising inflation and a possible hike in the Bank of England’s key interest rate, which must be incorporated into the contingency planning of the programs. In terms of governance and administration, COP26 has brought the ESG commitments that programs face to the fore.

“Meanwhile, the demands of the ongoing Pensions Dashboards program have created new challenges for the way the systems manage their membership data. There is obviously still a lot of work on the shoulders of the system trustees and there are many great challenges to be overcome. “

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