Hugh Nolan, President of the Society of Pension Professionals (SPP) and Director at Spence & Partners said: “This Annual Report highlights the fantastic work the Pension Protection Fund (PPF) is doing. The low risk investment strategy outperformed its benchmark by 1.6% over 2016, improving the funding level to just over 120%. The £6.1bn surplus in the PPF is a stark contrast to the record $79.4bn deficit in the Pension Benefit Guaranty Corporation (PBGC - the US equivalent of the PPF). The PPF is on track to reach a self-sufficient funding position by 2030 whereas the PBGC’s multi-employer programme is expected to run out of money completely by 2025. Donald Trump might have to poach Alan Rubinstein if he wants to make the PBGC great again!
“The PPF’s Report expresses the view that there is no need for a radical overhaul of the DB system or any systemic affordability crisis, while also recognising that some schemes undoubtedly face severe difficulty. The PPF is absolutely correct in its assessment of the DB pensions landscape and it is extremely reassuring to see some constructive suggestions on how to enhance DB pension provision, including looking for a practical way to consolidate schemes to cut the costs of running schemes.
“Most importantly, I was delighted to see the PPF make the point that schemes going into the PPF should not be seen as a bad outcome. Although benefits are admittedly cut back slightly from the intended levels when the PPF has to rescue schemes from insolvent employers, the benefits payable are still excellent and are typically at least double what the members could have got for themselves for the same contribution they have made over the years. The PPF’s robust financial management ensures that we will never again see members losing their entire pension along with their jobs when their employer goes bust.”
Charles Cowling, Director, JLT Employee Benefits, comments on the Pension Protection Fund’s annual report: “The Pension Protection Fund (PPF) has grown to a size whereby only two UK companies are likely to have larger UK pension funds than this. Whilst the PPF is aiming for self-sufficiency by 2030, there are some potentially unpleasant scenarios if they don’t make it, with the burden of financing the PPF via levies in the meantime falling on fewer and fewer pension schemes. Developments at the PPF won’t have gone unnoticed by a cash-strapped UK government, who may decide at some point in the future to add this large pool of assets to the national balance sheet - as they did with the Post Office a little while ago. If this were to happen, the Government gets the immediate benefit of a large inflow of cash and simply adds the pension liabilities and payments to the already large and growing pool of unfunded Government pensions.”
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