Marvin OnumonuThe Pension Protection Fund (PPF) published the 20th edition of the Purple Book, showing the UK’s defined benefit (DB) pension schemes stayed steady over the past year.
The number of PPF-eligible schemes fell from 4,974 to 4,840, with membership dropping from 8.8 million to 8.6 million.
The net surplus on a section 179 basis stayed strong at £214bn, close to last year’s £219bn, and the funding ratio rose to 125%.
On a full buy-out basis, the funding deficit improved from £69.5bn to £47.2bn.
Schemes with fewer than 1,000 members made up 80% of the total but only held around 10% of assets.
Schemes with over 5,000 members held nearly three quarters of all assets, even though they made up just 6% of schemes.
Nearly 80% of schemes had assets under £100m.
Only 4% of schemes stayed open to new members, and active membership dropped to 0.7 million from 3.6 million in 2006.
Pensioners now make up 47% of members, overtaking deferred members at 45%.
Asset allocations stayed stable, with 71% in bonds and bond proxies and 15% in equities. UK equities made up less than 5% of total equity holdings.
Assets in annuities hit a record high of almost 13%, showing more buy-in deals as schemes approach buy-out.
Shalin Bhagwan, chief actuary at the PPF, said: “In our 20th anniversary year, the 20th edition of The Purple Book provides valuable insight into the data and long-term trends shaping the UK corporate, defined benefit universe.
“This universe has significantly matured over the past two decades and this is increasingly reflected in asset allocations which, in turn, explains the stability over the past year.
“And while section 179 funding levels remain robust, the £47.2bn deficit on a buy-out basis is a reminder that as more schemes approach their endgame, the need for thoughtful long-term planning remains vital.”
David Hamilton, chief actuary at Broadstone, said: “The latest Purple Book from the PPF shows a picture of funding stability, with the continuation of many familiar trends.
“The number of schemes and members continues to shrink while funding levels remain very healthy.
“The data reflects the buoyancy of the bulk purchase annuity market in the last few years as the improvement in funding positions allows more schemes to access the insurance market and secure their members’ benefits.”
Hamilton added: “With over 4,800 defined benefit schemes still in the universe (albeit a number of these will already be secured and working through the buyout process), the de-risking market is likely to remain very busy for a number of years.
“At the other end of the spectrum, some may be surprised to see that one in four schemes are still expected to be in deficit on the PPF’s Section 179 basis, even before allowing for the newly announced changes to include pre-97 pension increases.
“This helps explain why the PPF continues to be cautious around potential risks, notwithstanding the very healthy picture across the defined benefit universe as a whole.”
