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£32bn wiped from DB schemes in July - PPF

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  • £32bn wiped from DB schemes in July - PPF

UK - The total funding position of almost 7,800 defined benefit (DB) pension schemes was reduced by over £32bn (€41bn) in July, according to the Pension Protection Fund (PPF).

Latest figures from the PPF 7800 Index showed the funding position of the schemes moved from an £8.3bn surplus at the end of June 2008 to a £24.1bn deficit at the end of July - a reduction of £32.4bn.

The PPF attributed the increase in scheme deficits to a fall in UK and global equities, as the FTSE All-Share Index dropped 3.7% in July, causing pension assets to lose 1.8%.

At the same time, the research pointed out 10-year gilt yields fell by 35 basis points to 4.9% in July, causing pension liabilities to increase by around 2.6%.

As a result, the PPF revealed falling bond yields have had a slightly bigger impact on funding positions over the last year than weaker equity markets, as aggregate liabilities for the 7,800 schemes increased by 8.6%, while the negative impact of equities only reduced assets by 7.4%.

The monthly index revealed the total deficit of schemes in deficit in July 2008 increased from £63.1bn to £80.1bn over the month, placing the pension funds in a worse position than the same period in 2007 when the aggregate deficit was just £34bn.

In addition, the total surpluses of schemes in surplus dropped to £56bn, from £71.4bn at the end of June, which is significantly lower than the total surplus of £117.3bn recorded in July 2007.

The PPF’s research showed the number of schemes in deficit rose in July to 5,857, or 76%, while the number of schemes in surplus fell to 1,886, compared to 3,172 the previous year.

Figures from the latest index also showed the value of scheme assets fell 1%  to £798.4bn in July, which resulted in a 6.2% fall in the three months to July and a drop of 5.6% over the year, while liabilities increased by 3% over the month from £798.3bn to £822.5bn.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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