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Investment Performance Means PPF in Good Shape to Face Future

  • Annual Report shows 25 per cent investment return and £1.07bn surplus
  • PPF membership totalled 128,000, at 31 March 2012
  • PPF on track to meet its long-term funding aims
  • But deteriorating UK pension scheme funding increases short-term risk
Despite difficult economic conditions, the Pension Protection Fund (PPF) remains in good shape to face future challenges and is confident that it can continue to look after its members’ futures. This is largely down to a robust investment performance during 2011/12.
The PPF’s annual report, published today (Monday), shows a return on invested assets of 25 per cent, as at 31 March 2012 - an excellent performance which is a result of its sophisticated liability matching strategies. This return is more than sufficient to offset the PPF’s rise in liabilities in what have been turbulent financial markets.

At the end of March 2012, the PPF had a £1.07 billion surplus over liabilities, up almost £391 million on the previous year. Its membership had increased to 128,000 people, and it was managing £11.1 billion of assets, a rise of £4.7 billion from 2010/11.

PPF Chairman, Lady Barbara Judge, said: “Our overall performance should give our members continued confidence in our commitment to provide their retirement compensation for as long as they need it.

“We cannot rest on our laurels, however. Already this year, we have seen claims on the PPF of more than £700 million – and a significant deterioration in the deficits of many of the other  pension schemes that we protect. We are determined, however,  that the PPF should remain strong enough to weather these storms.”

The PPF performance should be seen in the context of its objective to be financially self-sufficient by 2030, and the challenging environment for pension schemes as a whole. Today, it also published an update on its long-term funding strategy which sets out the probability of successfully achieving its 2030 target.

Chief Executive, Alan Rubenstein, said: “While we are still on course to meet our aims of being self-sufficient by 2030, the probability of achieving this fell during the year from 87 per cent to 84 per cent. Although this figure is still above our comfort level, we remain ever vigilant about events which will reduce this probability even further.

“Foremost in our minds has been the continuing global financial crisis and the adverse effect it has had on the funding positions of UK pension schemes. Increased claims on the PPF have already meant that our own funding level has fallen from 106 per cent in March 2012 to about 102 per cent and that levies are likely to rise in the short-term.”

1. Annual Report and Accounts 2011/12 – TOP FACTS AND FIGURES:
  • During 2011/12, 53,463 people transferred to the PPF, making a total of 128,114 people who have transferred since the PPF began.
  • Since 2005, the PPF has paid out a total of £463 million in compensation, more than £200 million of that was paid out in 2011/12.
  • At the end of 2012, there were 293 schemes in the PPF assessment period with assets of £5.3 billion and liabilities of £7.07 billion.
  • By 31 March 2012, the PPF was £1.07 billion in surplus, an increase of £391 million on the previous year.
  • By 31 March 2012, the PPF was 84 per cent confident of meeting its target of being financially self-sufficient by 2030.  
  •  Investment assets grew from almost £6.3 billion at 31 March 2011 to £11.1 billion at 31 March 2012.
  • During the year, the PPF’s investment strategy delivered an overall return of 25.2 per cent.
  • The PPF took on assets totalling almost £2.5 billion from the 147 schemes which completed assessment and transferred to the PPF during the year.
  • During the year, the number of people receiving Financial Assistance Scheme assistance – which the PPF manages on behalf of the Government – increased from 16,917 to 22,844 and the FAS paid out £74 million.

2. The Annual Report and Accounts and Funding Strategy are both available for download from the PPF website:

Annual Report and Accounts 2011- 2012

Funding Strategy Update

3. The funding update is the second formal review the PPF has carried out since it launch its funding strategy.

4. A photograph of Lady Barbara Judge is available on request.

5. 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 on 020 8633 5931/0789 425 5561 or Ana Moreno on 020 8633 4932/ 07961 957 480

[Published: 22 October 2012]

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