More FAKE NEWS on pension deficits #FABI


The Government’s just published its green paper ‘Security and Sustainability in Defined Benefit Pension Schemes’. It’s already generated knee-jerk headlines claiming 11m employees could see their pensions cut.

The green paper refers to “under-funded schemes” and “stressed employers”, but can’t tell us what “under-funded” means or who the “stressed employers” are and where to find them – this is FAKE NEWS.

First Actuarial has published its FAB Index at 31 January 2017, showing another healthy surplus of £275bn across the 6,000 UK defined benefit schemes. First Actuarial’s Rob Hammond suggests:

“We need to work out what we mean a “stressed” employer or an “under-funded” pension scheme. Loose talk costs pension rights; the DWP estimates that switching our private schemes from RPI to CPI costs ordinary members £90bn. That’s a lot of stressed pensioners! It’s time to calm down and take comfort from our FAB Index.”

Hammond adds:

“It’s good to see the Government challenging pension schemes to invest more productively. Trustees need to be aware of the best-estimate position of their scheme when assessing what prudence to add for funding purposes. The best-estimate position should reflect the expected return on the assets they actually hold, so if they are holding growth assets, trustees should be able to take credit for this.”

Technical note

Over the month to 31 January 2017, the FAB Index was stable with the UK’s 6,000 defined benefit (DB) pension schemes maintaining a healthy overall surplus of £275bn.

In contrast, the PPF 7800 index continued its up-down-up-down motion, with the deficit falling by 12% in January 2017 from £224bn to £195bn, having increased by 15% in the previous month (and fallen by 40% in the month before that).

These are the underlying numbers used to calculate the FAB Index.

The overall investment return required for the UK’s 6,000 DB pension schemes to be 100% fully-funded on a best-estimate basis – the so called ‘breakeven’ (real) investment return – has remained at around inflation minus 0.6 % pa.

FAB Index over the last 3 months Assets Liabilities Surplus Funding Ratio ‘Breakeven’ (real) investment return
31 January 2017 £1,467bn £1,192bn £275bn 123% -0.6% pa
31 December 2016 £1,476bn £1,206bn £270bn 122% -0.7% pa
30 November 2016 £1,443bn £1,147bn £296bn 126% -0.6% pa

The assumptions underlying the FAB Index are also consistent:

Assumptions Expected future inflation (RPI) Expected future inflation (CPI) Weighted-average investment return
31 January 2017 3.8% pa 2.8% pa 4.3% pa
31 December 2016 3.7% pa 2.7% pa 4.1% pa
30 November 2016 3.7% pa 2.7% pa 4.3% pa


Notes to editors

The FAB Index is calculated using publicly available data underlying the PPF 7800 Index which aggregates the funding position of 5,945 UK DB pension schemes on a section 179 basis, together with data taken from The Purple Book, jointly published by the PPF and the Pensions Regulator.

The FAB Index will be updated on a monthly basis, providing a comparator measure of the financial position of UK DB pension schemes.

Rob Hammond is available for interview. Please contact:

Rob Hammond on 0161 868 1320 or, or Jane Douglas on 0161 348 7933 or


About First Actuarial

First Actuarial is a consultancy providing pension scheme administration, actuarial and consultancy services to a wide range of clients across the UK.

We advise a mixture of open and closed defined benefit schemes with our clients concentrated in the small to medium end of the pension scheme market. Our clients range across a number of sectors including manufacturing, financial services, not for profit organisations and those providing services previously in the public sector.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions and tagged , , , , , , , , . Bookmark the permalink.

5 Responses to More FAKE NEWS on pension deficits #FABI

  1. DaveC says:

    To disseminate ‘fake news’ I’d want to hear a compelling motive for them to do so.

    The financial elephant in the room for government is benefit liabilities.
    They were huge pre financial crisis, they’re even more dangerous now.

    Giddying people up to the idea they’ll be better off with a lump sum in DC over a promise sounds like a carrot that later turns out to be a rotten old turnip painted bright orange with a thick splash of propaganda driven appeal.

    Starting with the private sector justifies an extension to the public sector.

  2. henry tapper says:

    There’s a strong motivation for those who want DB to fail to spread fake news that it is failing. The papers tell us up to 11m people could see their pensions cut by £20,000. The paper discusses whether offering an override to switch from RPI to CPI is ever a good thing.

    If you start from a position of wanting things to change, then you will bring your prejudices to the paper. I thought the paper was a genuine discussion document with some firm positions but mostly an explanation of the context for decision making.

    As for FABI – it shows that pension deficits or surpluses depend on how you value assets and liabilities. FABI is at one end of that spectrum and the buy-out position at the other and the truth for each scheme lies somewhere in between.

    What we’re doing Dave is trying to have a debate in an echo chamber which resounds with only one voice! That voice keeps telling us one thing, but there are many things to know. That’s what we mean by fake news.

    • DaveC says:

      “Propaganda is “information, especially of a biased or misleading nature, used to promote a political cause or point of view”.[1] Propaganda is often associated with the psychological mechanisms of influencing and altering the attitude of a population toward a specific cause, position or political agenda in an effort to form a consensus to a standard set of belief patterns”

      So who wants DB to fail?

      Why do government care? Or apparently care?

      Due to the PPF liability?

      But if that is indeed a lie, what is their real motivation?

      I trust your observation, I’m just wondering what you think the motives are.

  3. Con Keating says:

    I shall steer clear of the motivation issue(s). For my mind, the most powerful line in Henry’s blog is:
    The overall investment return required for the UK’s 6,000 DB pension schemes to be 100% fully-funded on a best-estimate basis – the so called ‘breakeven’ (real) investment return – has remained at around inflation minus 0.6 % pa.
    Think about what that means. The most basic criterion for any investment is that it should return in the future no less than the consumotion/purchasing power of the consumption foregone today And with such things as social term prefernces more. The fact that this is negative yells us objectively that these schemes are overfunded – significantly so.

  4. henry tapper says:

    No scheme more overfunded than the PPF?

Leave a Reply