Sarah Elwine, Actuarial Director at leading independent consultancy Broadstone, commented: “December’s figures are the first PPF 7800 to be released under its new methodology which significantly reduced the funding level of Defined Benefit pension schemes when first revealed in the publication of the Purple Book. While the change in methodology and consequent drop in overall funding levels may be of interest to policymakers, it should not unduly concern individual trustees or sponsors. The long-term trends remain constant with a drastic improvement in funding for many pension schemes which has turbocharged the de-risking market. Schemes remain in a healthy position and following another strong year for de-risking in 2024, we would anticipate the continuation of this as demand for insurance solutions remains high. New entrants have joined the market and trustees enjoy a growing number of end-game options. As we head towards the end of the year, trustees and sponsors should prioritise the same long-term objectives so they can decide on the best end game option for them. This includes managing funding and investment risk to reduce volatility, ensuring good quality administration to keep members secure and happy as well as appointing advisers that provide value for money.”
Alex Oakley, BPA Transaction Manager, at Standard Life, part of Phoenix Group: “The Index shows funding levels over November have remained broadly stable, falling 0.3%. However, what is interesting this month is the PPF released it’s 2024 Purple Book, including a revision of March 2023 funding positions to allow for updated methodology and experience, reducing its estimated funding levels by approximately 14% as at that date. These adjustments to the PPF’s Index incorporate more granular data on benefit payments, future accrual, and investment strategy, ensuring greater consistency in estimated funding positions. While the PPF has therefore reduced its estimate of the aggregate buy-out funding level of UK private sector defined benefit pension schemes, it is important to remember that this is the result of methodological updates rather than fundamental changes to the underlying financial health of DB schemes, and a large proportion of schemes continue to experience strong funding positions. The strong funding positions are reflected in strong activity levels within the DB de-risking market going into 2025, and looking ahead, the focus for many trustees will remain on securing member benefits and utilising strong funding positions to achieve their overall end-game strategies.”
Vishal Makkar, Managing Director, UK Wealth Consulting at Gallagher: “The PPF 7800 Index reported a monthly increase of £1.5bn in the overall aggregate surplus once again, topping out at £235.5 billion at the end of November with a total of 3,718 schemes in surplus. The UK pensions sector is undergoing several changes, driven by the Autumn Budget and a new mandate to consolidate the DC pensions market together with the UK local government’s current sprawl of DB schemes into a Canadian style model. As we head into 2025, the stage is set for the wider pensions sector to further establish itself as a key engine for economic growth. Change is also happening within the PPF itself, with recent adjustments to its actuarial models now accounting for cashflows and more granular asset breakdowns, as reflected in the latest Purple Book. These revisions offer a clearer view of the DB funding landscape, but the main story remains one of improvement. DB schemes are in a far stronger position than a decade ago, and the new methodology still reinforces this reality. In the new year, our sector will find itself under increased regulatory oversight, especially as the Labour government progresses its new review of the pension sector. It will fall onto trustees and sponsors to ensure members are kept informed on all the ongoing legislative changes. As many schemes move towards maturity, now is a good time to plan ahead and explore all potential end game strategies.”
The PPF announce changes to the PPF 7800 Index
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