A Christmas present for UK pension plc


The Pension Protection fund published its monthly update on Tuesday. The news slipped out quietly (as good news generally does).

  • The aggregate deficit of the 5,794 schemes in the PPF 7800 Index is estimated to have decreased over the month to £194.7 billion at the end of November 2016, from a deficit of £275.9 billion at the end of October 2016 (previously shown as £328.9 billion).
  • The funding ratio improved from 84.1 per cent at end October 2016 (previously shown as 81.4 per cent) to 88.1 per cent.
  • Total assets were £1,443.1 billion and total liabilities were £1,637.8 billion.
  • There were 4,272 schemes in deficit and 1,522 schemes in surplus.

Within the detailed commentary, it becomes clear that some of the improvement is attributable to a more favourable set of assumptions but the majority of the improvement in pension scheme funding is due to a 0.21% increase in gilt yields which materially improved the valuation of liabilities.

The markets actually fell over the period (2.1%) which again gives the lie to common sense. With less money in the pot to pay the same stream of pension payments you’d have expected more groans than party whistles, but that’s the crazy world of pensions – let’s pull some crackers while we can!


So what of FABI

We haven’t published our FABI index at the point of blogging but don’t expect any great shocks, the way that First Actuarial’s approach works avoids both irrational exuberance and this summer’s doom mongering.

I was at a dinner last night where the doom-mongerers were looking decidedly irritated and not without reason. The imagined crisis is growing less severe, the actual state of Britain’s pensions is returning to something aligned to the PPF 7800. We can expect  convergence (rather than the illustrated divergence) between FABI and the PPF 7800 (purple and blue) if the now “three” anticipated rate rises in the US – happen.


Of course the impact of Brexit negotiations on equity markets may be negative and that may reduce the solvency of schemes investing in shares, but unless these schemes are trying to find a buyer from the insurance sector, the long term prognosis remains good.

As we have been saying throughout the so-called funding crisis, what we are seeing is not catastrophe averted but a  reversion to some kind of sanguine normality (from which we should never have deviated).

And as for the transfer gold rush….

In the meantime, those rushing to get their transfers completed had best be quick about it. The improved transfer values that resulted from the collapse in gilt yields in the autumn won’t last long, already some of the three month offers have expired and let’s hope that with this better (technical) news on valuations, we’ll see an end to the transfer gold rush.

The triple apocalypse that isn’t quite happening

  1. Brexit
  2. Trump
  3. Pensions

The UK seems to be more resilient to Brexit, the Trump factor and to the QE intervention than though possible.

Not being an economist/ fund manager/ actuary, I am not surprised. There are an awful lot worse places to be than in the UK and there is a lot worse financial prospect than the single state pension and our typical accumulated private savings.

The continued belief in the system of employer sponsored private pensions, whether DB or DC is remarkable. Project Auto-enrolment is remarkable, the PPF is remarkable and our capacity to see through DB schemes can be remarkable too.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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