PPF publishes £4.1bn surplus

LifeboatThe Pension Protection Fund (PPF) has today reported a £4.1bn surplus and a 116.3 per cent funding ratio in its 2015/16 Annual Report and Accounts, published today.

The PPF describes itself as in a strong financial position with a healthy balance sheet, despite the BHS pension schemes entering the PPF’s assessment period shortly before the year end. The fund says it remains robust and capable of protecting members.

Between 1 April 2015 and 31 March 2016, 47 new schemes brought combined claims of £475.9m compared to £322.3m in 2014/15. The biggest of these was the BHS pension scheme. The accounts show 10,005 new members entered the PPF in 2015/16, making a total of 225,500 deferred and pensioner members.

Of the £2.4bn total compensation the PPF has paid since it was established in 2005, £616m was paid out in 2015/16.

The PPF’s investment strategy has delivered positive returns over the period and now has £23.4 billion in assets.

PPF chief financial officer Andy McKinnon says: “We had a successful year despite the challenging economic backdrop. Our robust strategy has put us in a strong position to manage the uncertainties ahead and our long-term risk model predicts that we will achieve financial self-sufficiency by 2030 in 93 per cent of scenarios.

“Members of defined benefit pension schemes in the UK can be reassured that we will protect their financial future should their employer fail.”

PPF chief risk officer Hans den Boer says: “There are clear risks in the current economic environment, which have grown since the end of March point that our modelling is based on, but our funding strategy remains on track and we continue to make good progress against it.”

AJ Bell senior analyst Tom Selby says: “Confirmation that the PPF maintains a substantial surplus of £4.1bn provides a crumb of comfort to members of defined benefit schemes that have gone to the wall, such as BHS. The lifeboat scheme remains a vital safety net for people who might otherwise fear losing their entire pot if their employer goes under.

“While the PPF’s finances are clearly robust at the moment, significant challenges may lie ahead.  Its funding position could come under severe strain if, as many predict, the Brexit vote sends the economy into a tailspin and pushes more sponsoring employers into insolvency.

“The PPF, like DB schemes, is also a hostage to shifts in life expectancy. If people continue to live longer that will put extra pressure on its ability to pay pensions to members of failed schemes in the future.”