The PPF could grow up a (C)DC lifeboat

Good job PPF

PPF CEO and Chair

One of the enduring features of the last ten years is Andy Young texting me “this is all getting too much, I think I’m going to retire”.

Among the many things that Andy has created – he is a great procreator – is the PPF. Thankfully Andy has seen his baby grow from a twinkle in the DWP’s eye to a robust teenager which will be 15 in April.

Andy is married to Sara who is the Chief Customer Officer of the PPF. She is his boss and the kind of boss I’d be happy to work for. She actually works for Oliver Morley who is the CEO and the PPF is a happy child.

The PPF has around 250,000 members. You can see the schemes it looks after here.

In its last 2018/19 report , the PPF showed just how fast it was growing up

Screenshot 2019-12-24 at 06.07.17

It’s school reports show it’s doing what is asked of it

Screenshot 2019-12-24 at 06.08.27

and this against a background of falling gilt yields which have catapulted liabilities ahead of assets

Screenshot 2019-12-24 at 05.59.01

The PPF has grown strong by hedging its liabilities using a derivative strategy which accounts for around 45% of its assets, the “return seeking assets are in bonds and a small amount of equities”.

This baby-food has been nutritious and has kept the young child healthy despite the economic headwinds it faced in its early years (it was only 2 in 2008).

The economic climate impacting Britain’s DB schemes is still unhelpful and – despite a brief period in positive territory in 2018, Britain’s DB schemes are still an unhealthy lot.

Screenshot 2019-12-24 at 05.57.51

But every month, the PPF publishes its numbers, telling us how the rest of the class are doing and reporting on the financial health of our funded DB plans

Screenshot 2019-12-24 at 05.47.10

Published November 30th 2019


Britain’s other pension success story

We are getting used to being told what a great success story auto-enrolment has been. But the PPF could equally deserve that title. While auto-enrolment is still a toddler, the PPF is proving year after year, its critics wrong.

There are many (including me) that it is over-fed by levies and could easily become lazy and obese from over indulgence. This pie chart does not show it sufficient.

Screenshot 2019-12-24 at 06.06.31

from the 2018-19 report

That 23% subsidy from “the levy” has been at the expense of the solvency of the rest of the funded defined benefit sector.

However , there will become a time when the PPF will be off its parents hands and ready for its adult role. The thought back in 2005 was that the PPF would be sufficient by 2030, When Oliver Morley took over in 2018 he told the FT that the PPF should easily meet its target and might even start to give back money to the remaining DB schemes not in its care. As I wrote five years ago, the PPF is a great British success story.

What will the PPF grow up to be?

I look forward to the day when the PPF can get to adulthood, reduce its levy to nothing and start working out what it’s going to do beyond paying a dividend to its funders.

I have some ideas about that , that I haven’t talked about on this blog for a long time. My hope is to find some new Andy Young , with that man’s insane energy , vision and charisma , who will turn round to Government and convince them that the PPF is the natural home of the CDC pension.

If you’ve read this far, you won’t be shocked by my optimism. I am optimistic that in decades to come, the PPF will pay DC savers scheme pensions at a rate above the prevailing annuity rate and that these scheme pensions will be available as the destination of an investment pathway.

I won’t go into the detail here, you may want to try to think through the mechanism (if you are an aspiring Andy Young).  But if we are to see the PPF for what it could be, then it has to have a place for all pension savers.


a lifeboat for us all

The PPF could grow to be a CDC lifeboat over time.



Andy Young , father of the PPF and a whole lot more!

About henry tapper

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

13 Responses to The PPF could grow up a (C)DC lifeboat

  1. Jnamdoc says:

    Henry, is the whole thing not a bit self-fulfilling and self-congratulatory – one leg of government (PPF) relies upon a derivative strategy that benefits another leg of government (HMT), the net effect being to ensure the compression of gilt yields and continued access to cheap borrowings. That’s more than convenient. Then the comparative impact of this endless supply of cheap debt (otherwise known as future taxation), artificially increase the prices of any assets with a yield, and sets unsustainably low hurdle rates, denying the economy access to growth. And what happened to the FAB index?

    • henry tapper says:

      I hope in time that the PPF will move into real assets and that it will consider itself a sovereign wealth fund as well as a lifeboat. For now – let’s thank it for working when so much else doesn’t!

      • Jnamdoc says:

        I can live with that, but the sooner the better. A sovereign fund that invests predominantly in the Sovereign, is not a lifeboat fund at all – its called nationalisation (or confiscation) of pension provision. It will need strong and proper governance when the time comes.

    • henry tapper says:

      I am no longer able to access the FAB index (I have left First Actuarial). I will ask the people who produce it to share it with me and if they do, I will start republishing FABI on this site

      • henry tapper says:

        I do agree with you about the investment strategy, tomorrow’s Christmas Day special will explain why I so want to see PPF investing in real assets – at least to back my pension!

  2. con keating says:

    Henry The PPFis already CDC in nature – it can cut benefits. As for the cutting of benefits on admission, there really is no need for this at all. Finally of course we have the levy – the PPF has built excess reserves of £6 billion – not bad for a scheme whch has only been around for some 15 years. – those reserves represent some ten years of levies. Ever thought you were being overxharged – massively?

  3. Eugen N says:

    I do not think that PPF should do more than fulfilling its Statutory function.

    It will not invest in real assets because it does not have to. Instead, it is requested to take a very prudent investment policy and assure all members are paid the pensions as per PPF rules.

    There is an expectation that more schemes would fall into the PPF, schemes with low funding based on the PPF assessment, so they will have their work cut out.

    • Jnamdoc says:

      Isn’t it strange that we allowed ourselves again to be talking and treating as parity real and virtual (or derivative) assets. In the end, there are only real economy assets, or government taxation (gilts) which (other than under a socialist regime, when its the other way round) should be a subset of the real economy.

  4. P D BEATTIE says:

    Yes and with those reserves the FAS members are still compaigning to avoid their ‘Pension Poverty’ to get the fair inflation indexing that they paid for and not received being blocked by flawed FAS rules originating from government/DWP of 2004!

    Peter D Beattie FAS/PPF Pensioner/Military Veteran

  5. John Mather says:

    While the orphanage can be seen as a great success what a pity that so many schemes have been abandoned by their natural parents. Where are the numbers showing the outcomes for the pensions in payment compared with the original promise made ? Gold plated pensions or just fools gold

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