12.12.2024
- Net funding position remains strong with a modest improvement from last year.
- Net surplus stands at £219 bn, with funding ratio at 123 per cent.
- Bond allocations rise to 70 per cent; equity allocations fall to 15 per cent.
- Enhanced roll-forward methodology together with updated scheme status data applied enabling DB funding picture to be shown in more absolute terms.
The Pension Protection Fund (PPF) has today published the Purple Book 2024 which shows the strong net funding position of the universe of defined benefit (DB) pension schemes has remained largely stable over the past year.
The Pensions Universe Risk Profile, commonly known as the Purple Book, is now in its 19th edition, and provides the most comprehensive picture of the UK’s DB pension landscape. It contains the latest data and analysis on key DB trends, including scheme funding, membership, asset allocation, de-risking and more.
Importantly this year, the PPF has applied two changes: firstly, an enhanced roll-forward methodology to calculate assets and liabilities which now uses a wider range of market indices, more granular asset allocation data, and estimates for benefit cashflows; secondly, new enhanced scheme status data as analysed by The Pensions Regulator (TPR). These updates apply to this year’s figures, together with a restatement of 2023 figures for ease of comparison.
The funding position of DB schemes, on a section 179 basis as at the end March 2024, showed a net surplus of £219bn and a funding ratio of 123 per cent, largely consistent with last year’s (restated) figures. The net deficit of schemes that are in deficit, on the same basis, fell to £21bn. When estimated on a full buy-out basis – to secure full scheme benefits – the funding ratio rose over the year to 94 per cent.
This year’s data shows the number of DB schemes in the universe has fallen by fewer than 100 over the year, down from 5,063 to 4,974 as schemes wind up, merge, or claim on the PPF. This was despite a record year for risk transfer deals with £60bn of transactions completed in 2023.
The DB universe remains highly fragmented with a long tail of smaller schemes. Schemes with fewer than 1,000 members make up 80 per cent of the total number of schemes but only around 10 per cent of total assets, liabilities, and members. Most schemes – 93 per cent – are closed to new members; out of 8.8 million members, only 0.7 million remain active.
Schemes in the universe have continued to invest a large proportion (70 per cent) of their assets in bonds, but there has been a further reduction in both the overall proportion of assets held in equities – down to almost 15 per cent – and within this, less than 7 per cent allocated to UK equities. By contrast, there has been a sharp increase in the proportion invested in private equity – up to almost 44 per cent.
Shalin Bhagwan, the PPF’s Chief Actuary, said: “After the dramatic improvements to DB funding levels in recent years, the past year has been marked more by stability. While aggregate scheme funding remains strong – with a net surplus of £219bn – risks do remain, underscoring the vital importance of sound endgame planning. The DB universe continues to mature as evidenced by de-risking trends with bond allocations up and further reductions to equity holdings. By refining our roll-forward methodology and using updated data, this year’s Purple Book provides an enhanced picture of DB scheme funding in absolute terms.”
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Notes to editors
As highlighted in recent editions of the PPF’s 7800 index, there have been updates to some of the modelling behind the results in the 2024 edition of the Purple Book. Firstly, scheme status data now follows TPR’s new enhanced validation analysis. Secondly, the updates to this year’s asset and liability calculations include applying a wider range of relevant market indices to the more granular asset allocation data collected in scheme returns, and estimating cashflows in and out of schemes. The resulting asset and liability estimates are shown in absolute terms – so our asset estimates are now more closely aligned to the Office of National Statistics’ (ONS) data – but our respective different approaches to this estimate means direct comparison may not be appropriate.
About the PPF
The Pension Protection Fund (PPF) is a public corporation, set up by the Pensions Act 2004, and has been protecting members of eligible defined benefit (DB) pension schemes across the UK since 2005. The PPF is run by an independent Board and is accountable to Parliament through the Secretary of State for the Department for Work and Pensions. It protects close to 9 million members belonging to around 5,000 pension schemes. If an employer collapses and its DB pension scheme cannot pay members what they were promised, the PPF pays compensation for their lost pensions. The PPF is funded by a levy charged to eligible schemes, the return on its investments, assets from pension schemes transferred into the PPF, and recoveries from insolvent employers.
The PPF is one of the UK’s largest asset owners with £32.1 billion of assets under management. Separate and additionally to the PPF, it also administers the Fraud Compensation Fund (FCF) and the government’s Financial Assistance Scheme (FAS). The PPF looks after over 430,000 members across the PPF and FAS.
For further press information contact:
PPF Press Office
020 8406 2107
