PPF grows surplus despite rocky year for DB sector

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PPF grows surplus despite rocky year for DB sector

The Pensions Protection Fund has increased its surplus to £4.1bn, bringing its funding level to 116.3 per cent, despite low investment returns and an increase in the value of claims over the year.

In its 2015/16 annual report, released on Thursday (21 July), the lifeboat fund revealed its overall assets under management had reached £23.4bn, a 4 per cent increase on the previous year.

Against its liabilities of £18.3bn, that put its funding level at 116.3 per cent, up 1.2 percentage points on the previous year.

The PPF calculated that it had a 93 per cent chance of meeting its target of being financially self-sufficient by 2030, up 5 percentage points on the previous year.

Members of eligible defined benefit pension schemes have recourse to the PPF if an employer becomes insolvent and where there are insufficient assets in the pension scheme to pay out.

Currently the PPF is funded in part by asset growth and in part by charging defined benefit schemes a levy to protected them should they fail. Over the year it raised £558 million in levies, almost exactly the same as the previous year.

However, its return on investments was significantly down at only 1.7 per cent, compared to 25.7 per cent in 2014/15. The unusually high return of the previous year was largely down to liability-driven investments, the PPF stated.

In real terms, that represented a net investment return of £323m for 2015/16, compared to £4.5bn for the previous year.

Forty-seven new schemes entered the PPF over the year, the biggest being the BHS scheme. They represented £476m worth of claims.

Andy McKinnon, the PPF’s chief financial officer, said: “We had a successful year despite the challenging economic backdrop.

“Our robust strategy has put us in a strong position to manage the uncertainties ahead and our long-term risk model predicts that we will achieve financial self-sufficiency by 2030 in 93 per cent of scenarios.

“Members of defined benefit pension schemes in the UK can be reassured that we will protect their financial future should their employer fail.”

Mr McKinnon was the second-highest paid executive at the PPF, receiving a salary of somewhere between £155,000 to £160,00, plus a £15,000 to £20,000 bonus.

The highest paid member of staff was chief executive Alan Rubenstein, who received somewhere between £200,000 and £205,000 for the year, plus a £40,000 to £45,000 bonus.

The PPF increased its total staff to 328.

james.fernyhough@ft.com