The Pension Protection Fund has increased its likelihood of becoming financially self-sufficient by 2030 to 90% after reporting a £2.4bn surplus in the fund.
The lifeboat fund’s annual report and accounts published today revealed as at 31 March this year the fund had a 112.5% funding level compared with 109.6% the previous year – an increase of £600m.
The PPF said strong investment performance was coupled with an upwards trend in economy and improvement to scheme funding which had decreased the number of claims made in the past year.
Its assets outperformed its liability benchmark by 2.9% and the fund’s assets under management now stand at £16bn, up from £14.9bn the previous year.
The PPF has therefore increased its confidence of reaching its target of being fully self-sufficient by its self-allocated 2030 target to 90%, compared with 87% last year.
It added that over the course of the year to March it took on assets totalling almost £1.34bn from schemes which completed assessment and transferred to the PPF. Meanwhile, compensation paid to members passed £1bn, of which more than a third was paid out in 2013/14.
PPF chairman Barbara Judge said the “pensions lifeboat continues to sail smoothly on towards its goal”.
However, she added: “While there are signs that the upward trend in the economy will continue and we expect further improvement in our risk profile, there are many challenges remaining. Our focus continues to be on maintaining stability in the face of ongoing uncertainty.”
This comes shortly after the PPF published its statement of investment principles (SIP), which outlined a shift to more illiquid ‘hybrid’ investments which have inflation and/or interest rate hedging characteristics and are intended to be held to maturity – for example sterling index-linked corporate bonds, private placements of bonds and structured notes.
PPF chief investment officer Barry Kenneth told portfolio institutional the move was driven by forthcoming regulation and the rising cost of holding derivatives.
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