PPF confident of navigating choppy waters
Tough market conditions mean that the aggregate PPF deficit of schemes within the PPF universe now stands at £302.1 billion, but in its 2016 Strategic Plan the PPF still believes it has an 88% chance (as at March 2015) of being self-sufficient by around 2030. That’s lower than the 90% chance (as at March 2014) of self-sufficiency quoted last year (see Pensions Bulletin 2015/13), but still higher than you might expect given the low yield environment.
The Strategic Plan, which particularly covers the years 2016/17 to 2018/19, also notes:
- Lower than expected numbers of schemes entering PPF assessment during 2015/16 (46 compared to an expected 75 in last year’s plan)
- That during 2016/17 the PPF will begin to manage part of its LDI portfolio in-house, which should generate significant savings (though these savings do not appear to come through in the budget figures quoted)
- The PPF will be enhancing its communication offering, exploring improvements to its website and digital services
- There will be changes to administration procedures as a result of the Financial Assistance Scheme closing to new applications from September 2016; and
- The number of PPF and FAS members is forecast to grow by 18% to 440,000 by 2018/19
Comment
The PPF’s current funding position is very strong, but what must be most worrying for it is a growing aggregate deficit presented by the universe of DB schemes that it protects. This was not meant to be the case, more than ten years on from the introduction of the scheme-specific funding regime. Equally worrying is that deficit reduction contributions have been on a downward trend since 2012. So whilst claims on the PPF have been mercifully low, the risk from future claims has not diminished. There could be choppy waters ahead.
This Pensions Bulletin does not constitute advice, nor should it be taken as an authoritative statement of the law. For further help, please contact David Everett at our London office or the partner who normally advises you.
