UK - The aggregated funding position of almost 7,800 UK defined benefit (DB) schemes worsened in August as the total deficit increased to £36.7bn (€45.5bn), the Pension Protection Fund (PPF) has revealed.
Latest figures from the monthly PPF 7800 Index showed despite a 3.5% increase in the value of some assets over the month, following rising UK and global equity prices, lower gilt yields increased liabilities by around 5%.
The data showed the increased deficit, from £24.1bn at the end of July to £36.7bn, means scheme funding is worse than the same period in 2007 when DB schemes reported an overall surplus of £59.1bn.
The number of schemes in deficit increased in August to 77%, from 5,865 schemes to 5,982 while the full deficit of schemes in deficit of £91.6bn, compared with just £43bn for the previous year.
The number of schemes in surplus therefore dropped from 1,888 to 1,761, and those in that position held the total surplus at £54.9bn, thought this is a fall of £1.1bn on the previous month, and is in contrast to a total surplus of schemes in surplus of £102bn at the end of August 2007.
However, increases in equity prices over the month meant the total value of scheme assets rose 4.2% to £832bn, although this is still a fall of 2.3% over the three months to August, and a drop of 2.1% over the year.
Despite the recent volatility on the equity markets, the figures from the PPF showed over the past year falling equity prices have only reduced assets by 4.1%, while lower bond yields have increased liabilities by 9.9%.
The monthly update also showed liabilities increased in August by 5.6% to £822.6bn, as 10-year gilt yields fell by 30 basis points to a yield of 4.63%, compared with a 4.3% rise in the FTSE All-Share Index.
In other news, the PPF has confirmed it has awarded the provision of its transition management services to three providers - Lehman Brothers International, BlackRock Investment Management and Goldman Sachs International.
The PPF initiated a search for a provider of transition management services in June 2007, and has confirmed it has now concluded a four-year framework agreement with the three firms which requires them to manage the reallocation of securities, assets and cash from one portfolio to another.
The three firms were appointed from eight applicants, and the selection process was based on a number of factors including the quality of project management, price and cost effectiveness and the detail and adequacy of reporting.
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