The Pension Protection Fund (PPF) has published The Purple Book 2022 – revealing a further improvement in the net funding position of the universe of defined benefit (DB) pension schemes it protects.
The Purple Book, also known as The Pensions Universe Risk Profile, is now in its 17th edition and aims to give the most comprehensive overview of the risks posed by the schemes protected by the PPF.
It reported that the net funding position on a section 179 basis improved to a surplus of £193bn in the year to 31 March 2022, compared to a surplus of £46.9bn the year before.
The aggregate funding ratio increased to 113.1% from 102.8% the previous year. This increase was mainly the result of market movements seeing higher gilt yields driving down liability values, together with large increases in equity values.
The report also showed the largest-ever annual fall in liabilities within the DB universe. Total section 179 liabilities fell by almost 12% and buyout liabilities fell by almost 10% in the year to 31 March 2022.
The PPF said schemes in the universe continued to invest a large proportion (72%) of their assets in bonds. However, it said while the proportion of assets invested in equities remains stable (19%), the proportion of assets invested in UK equities has fallen to a record low of below 10%.
For the first time, the PPF said there were now more schemes providing no form of accrual of benefits than those that do, with 51% of schemes closed to new members and new benefit accrual.
PPF chief finance officer chief actuary Lisa McCrory said: "Over the last year, there has been a material improvement in our funding position and in that of the schemes we protect. Although the general economic environment remains volatile, and much has changed in the economic and pensions landscapes since March, our more recent 7800 indexes show gains in funding. While a high interest and inflation environment could put pressure on employers, we're in an excellent position to continue to safeguard the 9.6 million DB pension savers under our protection.
"As a result of our financial position strengthening significantly in recent years, we are entering a new funding phase where our focus will shift to maintaining our financial resilience. This means we can now take steps to reduce scheme levy payments without risking current and future members' benefits. We expect to collect £200m in levy in the year 2023/24, nearly halving the levy collected in the previous year."