PPF/tPR : 2011 Purple Book

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2 February 2012

Each year (2011 is the sixth year of production), the Pension Protection Fund and the Pensions Regulator jointly publish the Pensions Universe Risk Profile (Purple Book). This document profiles the state and risks facing UK defined benefit schemes.

The analysis is conducted using scheme returns and 2011 therefore covers some 98% of the total number of schemes and 99.6% of estimated total liabilities. It is therefore highly representative of the state of the industry.

The main data and analysis focuses on the situation at the end of March 2011 : the summary therefore bears out relatively little change from March 2010 but acknowledges that the period since then captures the turmoil in world markets and so provides updates to December 2011 for readily available market data.

The key figure of interest are, of course, the fall in gilt (03/10 3.9%, 03/11 3.7%, 12/11 2.0%) and corporate bond yields (03/10 4.9%, 03/11 4.9%, 12/11 3.5%). The document isn’t able to translate these into changes in scheme solvency for year end 2011 : we will have to wait for the 2012 Purple Book for this : but there are a few hints that we can follow:

  • Assets came to £968.5bn as at 03/11
  • Estimated full buyout liabilities came to £1,435.5bn (funding ratio of 67.5%) as at 03/11
  • s179 (PPF) liabilities came to £969.7bn (funding ration of 99.9%) as at 03/11

Cross-referencing to the monthly PPF 7800 reports, the s179 funding ratio subsequently fell to 80.0% by 12/11. Broad asset levels were slightly higher : the decrease in funding was entirely due to the change in bond yields.

Corporate liquidations seem to be broadly holding steady at a level much lower than the 12 months to March 2009 : it will be interesting to see what 2012 holds for the industry.

The Purple Book can be downloaded from the PPF website

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  • Author: Martin Veasey
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