Week ending 4 December 2020
The PPF has published its 15th edition of the Purple book, covering the universe of UK defined benefit pension schemes at 31 March 2020. Some key headlines from this year’s edition are:
- overall scheme funding on a section 179 basis had dropped from 99.2% at 31 March 2019 (a deficit of £13 billion) to 94.9% one year later (a deficit of £91 billion), largely as a result of the reduction in gilt yields
- meanwhile the combined deficit for schemes which are in deficit (which is 63% of all schemes) rose from £160 billion in 2019 to £229 billion in 2020
- investment in bonds rose from 63% of overall assets in 2019 to 69% in 2020, while equity investment dropped from 24% to 20%
- the PPF’s probability of success (which is to be financially self-sufficient by 2030) dropped from 89% at 31 March 2019 to 83% one year later
- 41 new schemes entered PPF assessment in the year to 31 March 2020 (compared with 26 the year before), but the year’s claims totalled £0.5 billion (the previous year it was £1.9 billion, because of very large claim from the Kodak Pension Plan No.2).
The Arcadia DB pension schemes, with around 10,000 members, will enter PPF assessment in light of the company’s collapse. Tina Green, the owner of Arcadia, is reported to have agreed to pay the £50 million of contributions she was due to pay in September 2021 within the next ten days.
The Court of Appeal has overturned a High Court ruling which had blocked a Part VII transfer of a £12 billion annuity book from Prudential (now M&G) to Rothesay Life. The previous ruling, made in August 2019, placed significant weight on its finding that there was a degree of disparity between the two providers which could affect annuity holders. The new judgement said that the previous ruling was wrong on a number of points and failed to place enough weight on the independent expert’s evidence or the lack of objection from regulators. The High Court will now be asked to reassess the transfer and make a new decision about whether it can proceed.
Aviva has completed an £875 million buy-in for its own staff pension scheme, following on from a £1.7 billion buy-in for that scheme last year. The latest deal covered the benefits of 2,868 members, around two-thirds of whom are deferred members.
In the news over the last week, the Pension Schemes Bill is at the final hurdle, automatic enrolment limits are reviewed, there is new research into trustee decision-making, the FCA sees signs of improvement in DB transfer advice and a full buy-in is completed.
This quarter’s Arena has a summary of our recent Pensions Perspective, “Endgame planning comes of age”, which looked at how long-term funding and investment plans are evolving and why companies are increasingly taking the lead in designing an endgame strategy. It also shows all the usual financial and investment analysis for the quarter ending 30 September 2020.
Journey plans or glide paths may have been around for a long time but they’re at the heart of the Regulator’s proposed new funding code. In this Pensions Perspective, Leonard Bowman looks at how long-term funding and investment plans are evolving and explains why companies are increasingly taking the lead in designing an endgame strategy for their schemes.
This quarter’s Arena has a summary of our recent Pensions Perspective, “Emerging from lockdown”, which looked at how best to tackle the most common pension issues which companies are currently facing. It also shows all the usual financial and investment analysis for the quarter ending 30 June 2020.
As we keep hearing, we are living in unprecedented times. However, as we turn our attention to the future, what does the “new normal” mean for defined benefit pension schemes? In this Pensions Perspective, Leonard Bowman considers the most common pension issues that companies are facing and how best to ensure that the company approaches these on the front foot.
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