My first boss, a remarkable woman called Belinda Benney, often used to say to me that when we talk about pensions, people think old, they think grey, they think dull. But if each time you replace the word “pensions” with “money” (she used to say this with lip-smacking enthusiasm), suddenly everyone thought it was much more interesting. Today, I’m going to write about money.

It’s gone largely unnoticed by the general public that the nation’s multi-generation-spanning funding crisis in defined benefits pensions has now been solved. Is this because good news is no news? Is this because pensions professionals are lamentably poor at speaking outside their own circles? Is this because the public hear the word “pensions” when they should be hearing the word “money”?

I leave these questions to sociologists. Because the important point is that the nation’s multi-generation-spanning funding crisis in defined benefits pensions has now been solved.

Thanks to the Purple Book (and in my case, to Duncan Buchanan of Hogan Lovells for drawing these figures to my attention), we can see just how. As at March 2023, UK defined benefit schemes had a combined £1.371 trillion in assets. Their combined PPF liability value was just £929 billion. So there was a surplus on a PPF basis of £441 billion.
Even separating out the schemes that were in deficit, the aggregate deficit was just £2.3 billion. The PPF already had a surplus of £12.2 billion. We’ve got that covered handsomely.

This represents a big turnaround in the last few years. In 2012, JLT estimated that pension schemes combined were 85% funded, a deficit of £172 billion.

Let’s put those numbers into context. That combined asset value of UK pension schemes of £1.371 trillion is over half of the UK’s GDP. It is more than the government’s budget for 2023/24. So the fact that pension schemes are collectively in surplus is nationally highly significant. At a time when Britain doesn’t seem to be having much good news, this piece of spectacular good news needs far more attention than it’s getting.

And those numbers don’t take into account the schemes that have already been bought out. Cumulatively, more than £200 billion of pension scheme liabilities have been secured with insurers. That number could triple in the coming years. A handful of insurers, some recently established, will control awesome sizes of funds. The Prudential Regulation Authority has already expressed concern about concentration risk.

Such a gushing cataract of money needs to be channelled so that it flows safely and its power is harnessed constructively. The government has been looking at this and in my next post I will look at what it has in mind.

This is the first of three blogs by Alastair Meeks , that articulate the current Zeitgeist in pensions. The subsequent parts can be read here (pt 2) and here (pt 3)