What do we do with pension good news?

Good job PPF.PNG

Good job guys


Despite taking on pension schemes from employers including Carillion, Toys R Us and Hoover, with deficits totalling £1.2 billion – the highest total value to date, the PPF’s funding position has strengthened.

The PPF has reported a continued growth in its reserves to £6.7 billion and an increase in its funding ratio to 122.8 per cent. It has also reported a strong investment performance ahead of target with a 2.8 per cent investment contribution despite significant market volatility.

Oliver Morley, Chief Executive of the PPF, said:

‘‘The PPF remains resilient within a volatile economic landscape, and continues to provide valuable protection for 11 million pension scheme members. This year, more than 60,000 people are better off because the PPF exists following insolvency events that affected their defined benefit pension.

“While we remain strong, we are not complacent. We remain focused on becoming more efficient and effective for our members and levy payers.’’

Infact Oliver Morley said more than that, for the first time asking us to think what might happen as and when the PPF moved beyond where it no longer needed the support of a levy (self-sufficiency) and started generating money to give back.

There are many for whom the concept of “surplus” is heresy; such people see a ratchet of certainty leading to the PPF being funded on a buy-out basis. The only organisation in the UK capable of buying out the PPF, even at its current size, is Her Majesty’s Treasury.  No doubt they would be comfortable meeting PPF liabilities with the immediate reward of a buy-out valuation but that would represent one of the biggest transfer of value from one group of stakeholders to the tax-payer in British economic history!

The PPF cannot be allowed to become a gilts funded uber-secure fund. It is an investment fund, should be invested with strong social purpose and it should distribute any surplus prudently and in an agreed fashion.

Why the PPF has to take risk

In order to achieve a surplus, the PPF will have to take on risk. In its report and accounts (P36) it explains

The PPF has identified four key categories of risk to us delivering our organisational objectives. These are financial, operational, funding and strategic. We have set out our risk appetite for each of these, and we monitor them closely. We have a clear framework which allows us to take appropriate risk to achieve our objectives without jeopardising our ability to operate.

If only all statements were as clear and elegant!

the PPFs objectives are set out as follows.

PPF objectives.PNG

From this we can see that beyond 2030 (only 11 years from now), the PPF has no long term objective. If all we want the PPF to do is to become self-sufficient then we take a view – like Rob Reid – that we should abolish all talk of deficits and surpluses and put the fund in lock-down.

But of course, the PPF can no more abolish deficits than Gordon Brown could abolish “boom and bust”.

Any financial projection on an enterprise the size of the PPF is dependant on things happening well beyond its scope – or even that of the Chancellor of the Exchequer.

We go forward as an Enterprise Nation , accepting there is risk that our endeavours will not work , we will not see gross domestic product increase, we will not become more efficient  or work more, we will not be valued for the labour we do. There are many scenarios where Britain’s economic future may fall below our expectations.

But we plan on the expectation of success and not on the expectation of failure. The PPF must plan on the expectation of success and mitigate the possibility of failure. That is what i see the statements it is making saying.

So what do we do with pension good news?

Assuming we expect success (and that means surplus), there are three obvious candidates to receive back the excess money

  1. The tax-payer – who set the PPF up (but does not insure it)
  2. The surviving  employers – who have been paying the levy
  3. The members – who took an haircut on entry and may now get back to parity to pre-insolvency expectations.

I am not so stupid as to pretend I know which candidate should get what. But I think that Oliver Morley is absolutely right to ask us to begin that process.

If nothing else- considering the upside of pensions will be a welcome relief from so much doom and gloom over the past 20 years!




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, Pensions Regulator, Politics and tagged , , , , . Bookmark the permalink.

6 Responses to What do we do with pension good news?

  1. George Kirrin says:

    A few numbers from PPF’s 2018 annual report may indicate the levels of prudence:

    Levy income (for the year ended 31 March 2018) was £541.3m

    Investment income was only* £610.9m

    Net compensation claims paid in the year were £724.5m

    So claims were covered nearly 1.6 times.

    *income represents a yield of around 2.3% on assets of over £26bn, and arguably could be higher.

  2. Stephen Glover says:


    This is particularly interesting in light of the following:

    One of the the other fascinating panels at the DB Strategic Investment Forum on 7th November will feature a comparison of the pros and cons of the various alternatives making up the endgame for DB pensions: self-sufficiency vs buy-out vs the new SuperFund vs the PPF. The panel will feature a senior pensions exec, Edi Truell for the SuperFund, David Taylor for the PPF and Jay Shah for the Pension Insurance Corporation. So that should be a very lively debate indeed.

    As far as the PPF, and indeed the others are concerned, it will be every bit as interesting to explore their investment strategy as the merits of their solution in pure de-risking terms. This could throw some extremely interesting light on what is really best for members and whether staying put is a more attractive option than it may seem to many.

    Are you happy to announce the conference, and your participation in it, to your followers on the Pension PlayPen? I’m almost exclusively interested in attracting further non-paying delegates – i.e. senior pensions executives and trustees – to the event.

    All best wishes,



  3. Bob Compton says:

    Just a thought Henry, how about encouraging employers with DB schemes, who have and are paying the levy by being paid a dividend from the fund, in the same way the pensions super fund proposes for its equity backers. This would give the remaining employers with DB schemes a return on their levy premiums ( “investment”), and an incentive to maintain their dying DB schemes.

    I do think the PPF pensioners, should benefit from any surplus, after the remaining levy payers have been fully refunded. There is no reason why the PPF investment strategy should not be aiming for higher investment returns than is currently the case, and targeting full levy refunds, and full pensioner scheme benefits, with full CPI indexation on all PPF pensions, not just that “earned” post April 97.

    Only once all this has been achieved could then one consider a rebate to the government.

  4. henry tapper says:

    Great idea Bob

  5. Robert says:


    Where Bob Compton mentions……”Only once all this has been achieved could one then consider a rebate to the government.”

    Is this referring to the point you made……”Assuming we expect success (and that means surplus), there are three obvious candidates to receive back the excess money”

    “1. The tax-payer – who set the PPF up (but does not insure it)”?

    Some think the taxpayer has never been involved with or funded any part of the PPF…….is this correct?

    I am aware that the PPF separately runs the Financial Assistance Scheme (FAS) on behalf of the Government, which is funded by the taxpayer. However it relates to a different group of pension schemes from those supported by the Pension Protection Fund.

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