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PPF admits data error as DB deficits rise to £97.5bn

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  • PPF admits data error as DB deficits rise to £97.5bn

UK - The aggregate funding position of almost 7,800 defined benefit schemes reached a deficit of £97.5bn (€127.6bn) in February, after the Pension Protection Fund (PPF) admitted it had underestimated the deficit for January by almost £20bn.

Latest figures from the PPF 7800 Solvency Index revealed the February deficit is the highest since June 2003, as it increased from £80.8bn in January (revised from the original figure of £61.2bn) to £97.5bn at the end of February.

Data released by the PPF showed total scheme assets increased by 0.3% over the month to £800.3bn, this resulted in a 0.2% increase in assets over the year to February, but has led to a fall in value of 4.1% over the last three months.

In contrast, scheme liabilities increased 2.2% last month to £897.8bn, which represents a rise of 12.9% over the year to February 2008, a shift which the PPF index attributed to the "negative impact of equities on scheme assets combined with falling bond yields".

It showed in February assets rose 0.2% through improving equity markets, but lower gilt yields increased pension liabilities by approximately 1.8%, this has led the number of schemes in deficit to rise to 86%, or 6,702, of the total schemes in the sample.

The PPF pointed out this is the highest proportion since June 2005, while the number of schemes in surplus fell to 1,046 compared to 1,148 in January 2008, and 1,827 in February 2007.

The monthly summary highlighted the change in the funding status of these 781 schemes could be attributed to the fact that over the past year lower bond yields have increased aggregate liabilities by 8.1%, while weaker equities, following the recent global equity market volatility, has reduced assets by 5.1%.

The figures also revealed the total deficit of schemes in deficit in February 2008 is estimated to have worsened to £130.1bn from £118bn at the end of January, while the total surpluses of schemes in surplus fell to £32.6bn from £37.2bn at the end of the previous month.

The PPF has meanwhile admitted because of "a data error, the aggregate funding position of schemes in the PPF 7800 Index as at end January 2008 has been revised from a deficit of £61.2bn to a deficit of £80.8bn" and confirmed a "corrected version" has now been published.

The changes mean January saw the £19.6bn deficit recorded by the PPF in December increase by £61.2bn instead of the £41.6bn originally estimated, while the new figures reveal 85%, rather than 83%, of schemes reported a pension deficit.

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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