DB deficits ‘relatively stable’ with £7.6bn hike in December

This meant the shortfall increased to £86.4bn at the end of December, from £78.8bn in November.

Section 179 liabilities, the level of assets needed to secure PPF-level benefits with an insurer, were 95.5 per cent funded in December, down from 95.8 per cent in the previous month.

By the end of December, the total assets in DB schemes were £1.83tn, while total liabilities stood at £1.92tn. There were 3,206 schemes in deficit and 2,112 schemes in surplus, the PPF stated.

According to Lisa McCrory, the PPF’s chief financial officer and chief actuary, these figures showed “a relatively stable funding position over the final month of the year”. 

“[Last year] was an extremely challenging year as the Covid crisis impacted market movements, and further challenges are expected in 2021,” she said.

Vishal Makkar, head of retirement consulting at Buck, noted that “despite the ongoing rollout of several coronavirus vaccines, the UK is experiencing surging Covid-19 cases which, along with the prospect of a prolonged lockdown, means 2021 looks set to be another challenging year for DB schemes as businesses continue to suffer”.

He said: “The major concern is that another devastating year could threaten the strength of employer covenants, especially in heavily affected sectors such as retail and travel.

“This will bring into focus the need for a good risk monitoring framework looking at the sponsor covenant alongside investment risk and funding.”