UK crawls back towards PPF surplus
On the go: UK defined benefit schemes are inching towards being fully funded on the basis used by the Pension Protection Fund, new figures from the lifeboat reveal.
Section 179 liabilities, the level of assets needed to secure PPF-level benefits with an insurer, were 98 per cent funded at the end of 2019, up from 96.1 per cent a month earlier.
The lifeboat’s monthly 7800 Index update showed that assets roughly flatlined, ending December at £1,740.3bn. Liabilities, meanwhile, fell significantly over the month, from £1,815.7bn to £1,775.7bn, as gilt yields rose by more than 10 basis points across all maturities.
The improvements see DB schemes edging back towards the funding levels seen in late 2018, when the UK was briefly in aggregate surplus. A year previously the deficit had just begun to open up, standing at £31.1bn in December 2018.
Since the index calculates the cost of buying out liabilities at the level guaranteed by the PPF, the total shortfall for schemes in deficit can be seen as an indicator of the funding hit the PPF would face if all sponsors were to become insolvent.
Here too there was good news, with the aggregate deficit for underfunded schemes shrinking to £184.9bn from £208.9bn at the end of November 2019. However, at the end of December 2018 the equivalent figure was £166.4bn.