The PPF Purple book was published this week and – as expected – it told a story of corporate DB funds in aggregate surplus.

Toby Nangle’s FT article beautifully illustrates just how much a fourfold increase in gilt yields makes to the theoretical funding levels of the 5200 corporately sponsored  DB schemes.

But is buy-out job done? I learn  that BP Pensioners are not prepared to see their scheme be bought out and their trustee give up on its members.

The BP pension fund has a record £5bn surplus, why spend that to give an insurer’s shareholders a good year.

The distribution by membership size of this surplus makes for interesting reading.

Maybe the largest and smallest schemes – were the ones, for different reasons, had least to do with LDI.

And they are likely be the schemes least likely to buy-out, small ones not being worth the insurer’s candle and the large ones , most likely to give them indigestion.

The insurer’s sweet spot is with the medium sized schemes and were the gateway in operation, these would bifurcate between those the insurers don’t want and those they do.

The insurers want well-funded schemes , with good quality data and de-risked assets.

But do schemes with an exaggerated residue of illiquid assets (that couldn’t be sold during the LDI crisis), want to sell these at the wrong time to please the insurers.

And-  importantly – do the insurers have the capacity?  We hear a lot about this bumper year for risk transfer. It will most likely be a  record year for buy-outs and buy-ins, but the mania for longevity swaps (which so far have been an absolute disaster) are on the wane.

There is not sufficient evidence of a boom in buy-out to make me feel that it’s “job done”.

Toby Nangle is interesting here

According to the parliamentary testimony of the insurance industry there are absolutely no capacity problems, no really, none at all, promise promise, cross my heart and hope to die.

This declaration tends to elicit chuckles from pension scheme trustees, and the PPF submitted in their response to the call for evidence around the question of a public sector consolidator reckoned that “there is very likely to be a multi-year queue” for buy-out given very real capacity constraints.

Nangle is clear that productivity is not just a matter of inward investment, it’s also a matter of having free cashflows from a company’s ordinary activities.

The chart below shows that there is still a long way for special (deficit) contributions to fall.

It is as important for the UK economy that we stop draining the bank balance to feed the deficit and use not just the money in pensions, but the money outside it, to reflate the economy.

Pension funds have a lot of work to do, they can stop being a pain to their sponsors, start being a boon to capital starved growth stocks and they can continue to pay good quality pensions – preferably with discretionary increased, to members.