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Special Report

ESG: The metrics jigsaw


Pension Protection Fund to stay course despite UK downgrade

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  • Pension Protection Fund to stay course despite UK downgrade

EUROPE – The UK's Pension Protection Fund (PPF) has no plans to change its investment strategy on the back of the recent downgrading of the country's credit rating by rating agency Moody's.

Martin Clarke, executive director at the lifeboat scheme, said the downgrade was expected and to a certain extent already factored in.

He told IPE: "There are only two main economies that are AAA rated – Germany and Canada – so the downgrade has been expected. Unless things change dramatically, it should not affect our strategy at all.

"We are hedged against currency movements, too. Therefore, there is no reason for us to react on a one-point downgrade when our liabilities are denominated in sterling.

"The downgrade might possibly affect the cost of borrowing at the very finest of margins in the UK, but it is most unlikely. We are all still waiting for long-dated interest rates to rise."

The PPF invests predominantly in fixed income, as it needs to invest and perform differently from the pension funds it insures.

Cash, UK Gilts, global government bonds and global aggregate bonds including credit make up 70% of its strategic allocation.

Public equity accounts for 10% and alternatives, including property, 20% of its portfolio.

The PPF has several sources of income including an annual pension protection levy paid by eligible pension schemes, recoveries of money and other assets from insolvent employers of schemes it takes on, the assets of its transferred schemes and returns on its own investments.

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