Iain Clacher and Con Keating
Iain Clacher & Con Keating
The Office for National Statistics has just published its half-yearly Financial Survey of Pension Schemes for the two quarters ended December 2023 and March 2024. There are some massive and important discrepancies between the figures produced by TPR and PPF and the ONS survey results.
Table 1, below, shows the total assets held by private sector DB schemes for the period December 2021 to March 2024.
Our own work simulating the ONS survey method, based on a sample of around 1,000 schemes, suggests strongly that the ONS figures are the more accurate.
Table 1: Value of assets held by private sector DB schemes – December 2021 to March 2024
We have not seen any value for scheme assets published by the Pensions Regulator (TPR) for March 2024, though Neil Bull has cryptically referred to schemes having £1.3 trillion in assets. At year-end 2023, TPR reports schemes as holding £327 billion more that the ONS survey reports. PPF reports £237 billion more than the ONS in December 2023 and £255 billion in March 2024.
The discrepancies have been growing significantly over the period. They are highly statistically and financially significant. For example, the PPF s179 funding ratio of 146.5% reported in March 2024 would be just 120.5%. If overall scheme funding reported using TPR.s values was 100%, this would fall to 78.5% using the ONS values.
As PPF’s figures are based on returns to TPR, it is perhaps not surprising that a similar trend is present in their data. However, it is reasonable to expect PPF values to lie above TPR’s due to the presence of buy-in insurance policies held by schemes – these policies pay the full benefits of scheme members, not the PPF’s reduced benefits, and would represent a source of profit to them not available to the scheme. However, in December 2023, PPF reports £90 billion fewer assets than TPR.
The ONS survey reports insurance policies held by schemes. It is unclear what, if any proportion of these are buy-out policies. The ONS survey reports policies held by schemes as £145 billion in December 2021, unchanged at £145 billion in March 2024. These policies represent an increase from 8% to 12.3% in overall scheme assets. If we assume that the policies have a duration of ten years, using gilt yields as the discount rate (which rose from 0.98% to 3.89% over the period), this unchanged value would represent an increase in nominal coverage of £52.5 billion.
The most worrying aspect of the discrepancies is the Impact Assessment for the new low-dependency funding requirement was based on TPR figures. It seems that the new DB funding regime is likely to prove extremely costly to schemes, sponsors and the taxpayer. At the very least, some explanations are due.