Inflation and Defined Benefit Pension schemes

31 October 2011 October saw the release of notably high inflation figures – a two year peak for CPI and a twenty year peak for RPI – coinciding with the setting of pension increases for UK defined benefit pension schemes with September year-end. We provided a brief update at the time of release here but here present a more detailed paper on the direct and indirect impacts of inflation on these schemes. Inflation provides a good example of a crucial factor that affects both sides of the DB scheme balance sheet and our response as pension professionals should therefore bear…

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DB Pensions – End-September 2011 PPF 7800 deficit

11 October 2011 The Pension Protection Fund produces a monthly index update (the October release has data taken as at 31 September) of the estimated funding position of the DB schemes potentially eligible for entry into the Fund. Total scheme deficits showed an increase from £117.5bn as at end August to £196.4bn as at end September : an almost doubling, though it is inevitable that this figure will be volatile (being the difference between two much bigger numbers: assets vs liabilities). The PPF universe aggregate funding ratio continued to fall from 89.2% to 83.1%. The fall in funding levels has…

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DB Pensions – End-August 2011 PPF 7800 deficit

13 September 2011 The Pension Protection Fund produces a monthly index update (the September release has data taken as at 31 August) of the estimated funding position of the DB schemes potentially eligible for entry into the Fund. Total scheme deficits showed an increase from £67.3bn as at end July to £117.5bn as at end August. This increase was somewhat smaller than the £60bn increase last month, but nevertheless is not welcome news. The PPF’s universe aggregate funding ratio fell to 89.2% from 93.7%. As we expected, the fall in funding levels has occurred both due to a decrease in…

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DB Pensions – End-July 2011 PPF 7800 deficit

11 August 2011 The Pension Protection Fund produces a monthly index update (the August release has data taken as at 31 July) of the estimated funding position of the DB schemes potentially eligible for entry into the Fund. Total scheme deficits showed an increase from £8.3bn as at end June to £67.3bn as at end July. The liability calculations are worked on a s179 basis which approximates to the cost of having an insurance company take on the schemes’ payments but at the PPF’s level of benefit coverage. The change in deficit is only partly due to asset falls :…

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The Pensions Regulator : Recovery Plans

June 2011 The Pensions Regulator has published “Recovery Plans : Scheme funding and other security arrangements” which provides an analysis of DB scheme recovery plans (valuation dates up to end September 2009) submitted to TPR before February 2011. This provides useful information on the funding level of this cohort plans and some ongoing timeline comparators as a large number of schemes had also submitted prior plans which had been included in an earlier report. Also interesting is the discussion on the increased prevalence of the use of contingent assets, often coupled with longer recovery periods, particularly for some of the…

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  • Author: Martin Veasey
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