Pension Protection Fund

A rise in the number - and value - of pension schemes claiming on the Pension Protection Fund (PPF) resulted in its deficit increasing from £517 million as at 31 March 2008 to £1.2 billion as at 31 March 2009.

 

This figure was revealed in the PPF’s 2008/09 annual report which was published today (Thursday), alongside a funding ratio figure of 88 per cent, a reduction from 91 per cent in the previous year.

 

PPF Chairman, Lawrence Churchill, said: “The economic downturn has highlighted how vital PPF protection has been. None of us would want to go back to an era where people lost their pension as well as their jobs.

 

“We expected that this year’s claims would be larger than our levy so we were not surprised by these figures which have been impacted by market volatility and low interest rates.

“More importantly, the pension protection framework has proved resilient in testing times and our confidence that we can continue to pay our members the compensation they are due is undiminished. The liquidity of the PPF remains strong and we have kept our levy unchanged in real terms for next year.”

 

PPF Chief Executive, Alan Rubenstein added that the PPF, both in its own right and through schemes being assessed for entry, is becoming a significant investor, with a portfolio of about £3 billion, as at March 2009.
 
“We have benefited from our sophisticated hedging strategy which resulted in the growing portfolio achieving a return of 13.4 per cent on our invested assets,” he said.

 

“Our priority remains to maximise returns on our investments but without taking undue risk to make sure we continue to fulfil our obligations to our members.”

 

He added: “The lack of big claims and market improvements since March mean we estimate that, by the end of September, our deficit had fallen back below the £1 billion mark and our funding ratio had returned to more than 90 per cent. But, we cannot afford to be complacent. Our position could yet be affected by increases in claims or by future movements in the financial markets between now and next March.”

 

ends
 

Notes to editors:

 

1. TOP TEN  HIGHLIGHTS FROM 2008/09.

By 31 March 2009:

 

1. 30,732 members had transferred to the PPF, with 12,723 already receiving compensation

 

2. 100 schemes had transferred to the PPF and a further 48 schemes had completed the assessment process by other means, eg rescue or buyout

 

3. 290 schemes were in the PPF assessment period, representing about 179,000 members who were assured that they would, at least, receive PPF levels of benefit ( or more if their schemes can afford it )

 

4. The PPF deficit increased from £517 million in 2007/08 to £1.23 billion in 2008/09

 

5. The PPF earned a return of 13.4 per cent on its invested asset, including gains of £318 million from its portfolio of hedging instruments

 

6. PPF funding position – difference between assets and liabilities – fell from 91 per cent to 88 per cent in the same period ( the same level as 2006/07 )

 

7. The PPF set a levy estimate for 2009/10 of £700 million ( indexed to wages ), the same level in real terms as that set for 2008/09

 

8. PPF investment portfolio grew to £2.93 billion from £1.47 billion in 2007/08

 

9. PPF received £1.26 billion of assets from levy receipts and from transferring scheme assets

 

10. PPF was responsible for overseeing schemes in PPF assessment with assets of £5.9 billion, and liabilities of £8.82 billion.

 

 

2. The Annual Report and Accounts 2008/09 was laid before Parliament on Wednesday 4 November and is now available on the Pension Protection Fund’s website.

 

3. The Pension Protection Fund was set up under the provisions of the Pensions Act 2004 in April 2005 and is classified as a public financial corporation. It has been established to pay compensation to members of eligible defined benefit and hybrid pension schemes when there has been a qualifying insolvency event in relation to the employer, and where there are insufficient assets in the pension scheme to cover Pension Protection Fund levels of compensation.

For further press information contact: Richard Hunt 020 8633 5931 / 07894 25556