UK - The Pension Protection Fund (PPF) has revealed the aggregate funding position of almost 7,800 defined benefit (DB) schemes reached a deficit of £97.3bn (€119bn) at the end of October.

Figures from the monthly PPF 7800 Index showed the number of DB schemes reporting a funding deficit increased to 6,468, or 84% of the sample, compared to 6,345 a month earlier.

The number of schemes in surplus has fallen by more than 50% over the last year, from 3,121 in October 2007 to 1,273 in October 2008, while the aggregate funding position of all 7,800 schemes has reduced by more than £181bn, from a surplus of £84.1bn in October 2007 to a deficit of £97.3bn a year later.

Results from the PPF Index - which provides estimated funding levels on a section 179 basis using scheme valuation data - showed the total value of scheme assets also decreased by 6.7% over the month to £716.2bn.

The research attributed the drop in asset value to falling UK and global equity markets, as in October the FTSE All Share Index slipped by 12.1%, with the total surplus of schemes in surplus declining by £8.5bn to £24.7bn.

However the PPF Index claimed the worst of the falls in equity markets have been offset by higher gilt yields, which lowered pension liabilities by 4.7%, although overall scheme liabilities reduced by 4.1% to £813.5bn from £848bn in September.

That said, the total deficit of the 6,468 schemes in deficit increased to £122.1bn, from £113.5bn the month before, which is more than three times the total deficit recorded in October 2007.

But the latest figures from the PPF are lower than might have been expected for October, as last month Martin Clarke, PPF director of financial risk, claimed the aggregate deficit had increased to £125bn by 8 October 2008.

The figures were highlighted by Clarke in a presentation at the National Association of Pension Funds (NAPF) annual conference in October when he confirmed that going forward the PPF intends to take into account the investment strategy of pension schemes when determining the risk based levy. (See earlier IPE article: PPF to include investment risk in new levy)

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

 

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