“Other people’s money” – The PPF’s shocking surplus | AgeWage: Making your money work as hard as you do

Al Meeks has posted this blog on Linked in

I am pleased this question is being asked because there are many in my circle who think there is too much insurance and insufficient initiative.

For many companies, buy-out is not affordable, they must look to ways to run off their pension scheme and they need assurance than in doing so they are doing the right thing.

The penury to companies is an ongoing threat from pension schemes because there is no way out of “run-on”. There has to be a means to consolidate – to take away high operational costs (relative to benefits) – and an inability to invest with the economies of scale. Right now there isn’t – no superfund to help – other than the few schemes that meet the commercial needs of Clara.

Many small companies have weak covenants as Charles Malcolm-Brown’s SME group explains. They are happy to have no levy next year but they still look at the surplus in the PPF and ask “what is it for”

So long as trustees and by extension sponsors are deemed to be villains by seeking ways to become solvent through investment, the PPF will continue to be considered a punishment for those who have no alternatives but invest. Trustees and employers who struggle on are not wastrels.

The article below suggests the PPF should be perceived as a place of comfort to members, not a place like the Victorian workhouse.

Separately, there needs to be comfort for those with no pre-97 revaluation, in the FAS section of the PPF.

I welcome Alistair’s brilliantly funny article.

Alastair Meeks

This week, the Pension Protection Fund announced that it was not going to charge pension schemes a levy next year. Until the law change was announced in the coming Pension Schemes Bill, the PPF could not risk this because the existing power to set the levy did not allow the PPF to increase a levy from zero. This glitch is to be remedied. Pre-emptively taking advantage of the coming change in the law, the PPF is waiving the levy for the coming year.

The bunting has been hung out around pensions LinkedIn. Forgive me if I keep my cavorting with joy to a minimum. This is not exactly munificent. By its own estimates, the PPF has £31 billion, with a surplus of £14 billion on the liabilities calculated at £17 billion. Cancelling the levy saves defined benefit schemes collectively just £45 million. That’s a lively day’s market movement.

The PPF does not have the power to start throwing the dosh around. But the government does. The government is reluctant to commit to raising the level of PPF compensation or to adjusting the benefits (for example, by providing pension increases to pre-1997 pensions). I understand this. I cut my teeth in pensions in the early 1990s, when employers and trustees worked together on benefit improvements that future generations had to fund when the imagined surpluses of the time crumbled and turned into yawning deficits. The government’s reluctance to follow this path is understandable.

Still, its line on this is unsustainable. It insists that the PPF makes no commitments that it would regret on a rainy day. With the PPF running a surplus of 82%, the government must be fearing a rainy day fit for an ark.

If the government leaves the PPF sprawled on top of such a massive pile of gold like Smaug, no member benefits from that. In the long run, we all die. In the long run, all PPF members will die. They are doing so now having suffered reduced pensions for years and without ever having benefited from that massive surplus, and that is a continuing moral disgrace.

There has to be a halfway house. The government has to be able to release some of the funds for the benefit of PPF members without committing itself irrevocably.

If only there were a mechanism where schemes like the PPF could release funds to members each year without making longer term commitments. If only there had been lengthy public discussion of such mechanisms in the pensions industry for many years, with new benefit designs being established for the purpose.

Left brain meet right brain. The idea of CDC is not suitable for every circumstance, but if ever there was a case for annual setting of higher benefits based on what funds permit, surely the PPF is it?

And if the government is not prepared to do this, it has to explain what it thinks this surplus is for. It is a moral necessity such large sums are used for something.

1 Response to “Other people’s money” – The PPF’s shocking surplus

PensionsOldie says:

September 25, 2025 at 7.32

I do wonder if the Government is so keen to hold on to the surplus, so that the PPF could bail-out the FSCS if one of the large bulk purchase annuity insurers should fail?
After all the consultants say they are undertaking risk analysis on the potential providers because certainly before and potentially even after buy-out, the employer remains on the hook for its deferred remuneration promises. So perhaps the past premiums might still have a potential benefit.

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