Purple book shows healthy DB funding but PPF says risks remain
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Defined benefit schemes continue to be very well funded and hold most of their assets in bonds but are reducing in number, the Pension Protection Fund’s Purple Book 2024 shows. While the figures show strong funding, risks remain, the PPF says.
The 19th edition of the Purple Book, published on Thursday, summarises facts around DB schemes in the UK that are eligible to fall into the lifeboat fund should the worst happen. The publication shows that this is increasingly unlikely for most schemes. The net funding position of DB schemes increased again over the year to March, to a surplus of £219.2bn with an aggregate funding level of 123.1%. The surplus, calculated on a section 179 basis, rose from £206.9bn in March 2023, while the funding ratio represents an improvement of three percentage points.
"After the dramatic improvements to DB funding levels in recent years, the past year has been marked more by stability," said chief actuary and interim chief financial officer Shalin Bhagwan.
Despite the positive picture, Bhagwan warned against complacency: "While aggregate scheme funding remains strong – with a net surplus of £219bn – risks do remain, underscoring the vital importance of sound endgame planning.”
His comments come after consulting firm WTW called for the PPF to reduce its planned £100m levy for 2025-26, citing DB schemes' financial health, as well as the PPF’s £13bn surplus and 166% funding level.
The PPF noted schemes continued to invest a large proportion (70%) of their assets in bonds, while just 15.5% was invested in equities, falling from 18.8% a year earlier. The derisking of investments is happening as schemes mature – three-quarters (74%) are closed to new accrual – receiving little or no new contributions. It means they lose the capacity to take significant investment risks.
Many schemes are now winding up after transferring liabilities to an insurer in a buyout transaction, while some are merging or entering PPF assessment. The PPF universe has shrunk to 4,974 schemes, losing 89 in a year. There were 7,751 in 2006.
The PPF said it used “an enhanced roll-forward methodology” to calculate assets and liabilities, relying on a wider range of market indices, more granular asset allocation data, and estimates for benefit cashflows. It has also used new scheme status data from the Pensions Regulator. Last year’s figures have been restated for easier comparison.
This year’s Purple Book is a reminder of the improvements to pension scheme funding seen as higher gilt yields reduce liability values, said Nigel Jones, head of consulting and actuarial at consultancy Broadstone.
The 19th edition of the Purple Book, published on Thursday, summarises facts around DB schemes in the UK that are eligible to fall into the lifeboat fund should the worst happen. The publication shows that this is increasingly unlikely for most schemes. The net funding position of DB schemes increased again over the year to March, to a surplus of £219.2bn with an aggregate funding level of 123.1%. The surplus, calculated on a section 179 basis, rose from £206.9bn in March 2023, while the funding ratio represents an improvement of three percentage points.
"After the dramatic improvements to DB funding levels in recent years, the past year has been marked more by stability," said chief actuary and interim chief financial officer Shalin Bhagwan.
Despite the positive picture, Bhagwan warned against complacency: "While aggregate scheme funding remains strong – with a net surplus of £219bn – risks do remain, underscoring the vital importance of sound endgame planning.”
His comments come after consulting firm WTW called for the PPF to reduce its planned £100m levy for 2025-26, citing DB schemes' financial health, as well as the PPF’s £13bn surplus and 166% funding level.
The PPF noted schemes continued to invest a large proportion (70%) of their assets in bonds, while just 15.5% was invested in equities, falling from 18.8% a year earlier. The derisking of investments is happening as schemes mature – three-quarters (74%) are closed to new accrual – receiving little or no new contributions. It means they lose the capacity to take significant investment risks.
Many schemes are now winding up after transferring liabilities to an insurer in a buyout transaction, while some are merging or entering PPF assessment. The PPF universe has shrunk to 4,974 schemes, losing 89 in a year. There were 7,751 in 2006.
The PPF said it used “an enhanced roll-forward methodology” to calculate assets and liabilities, relying on a wider range of market indices, more granular asset allocation data, and estimates for benefit cashflows. It has also used new scheme status data from the Pensions Regulator. Last year’s figures have been restated for easier comparison.
This year’s Purple Book is a reminder of the improvements to pension scheme funding seen as higher gilt yields reduce liability values, said Nigel Jones, head of consulting and actuarial at consultancy Broadstone.
He pointed out that UK equity investment has fallen along with overall equity exposure: “Given the government’s aim to increase pension investment in UK infrastructure and equities it is noticeable that scheme investment in UK equities as a proportion of total allocation to equities also dropped below 7%."
