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Pension Funds

PPF: Corporate pension funding dips in December, but up for the year

The total deficit of all defined benefit funds covered by the PPF 7800 index grew 18.5% in December to £104 billion ($140 billion), as an increase in liabilities outpaced asset growth.

However, the deficit as of Dec. 31 fell 53.6% compared with figures a year earlier.

The funding level of these pension funds fell to 93.9% as of Dec. 31, compared with 94.7% as of Nov. 30 and 86.8% as of Dec. 31, 2016.

The PPF's update said assets increased in December by 1.7% and for the year by 7.7% to total £1.59 trillion. The PPF said the increase over the month reflected the impact of higher equity and bond prices. For the year, the FTSE All-Share index was up 8.5%.

Liabilities also grew in December, by 2.6% to total £1.69 trillion. For the year, liabilities fell 0.4%. Conventional 15-year gilt yields fell 12 basis points in December and index-linked five-to-15-year gilt yields also fell, by 11 basis points. For the year, 15-year gilt yields fell 7 basis points and index-linked five-to-15-year gilt yields were up 13 basis points, said the PPF.

The proportion of pension funds in deficit grew to 66.4% as of Dec. 31, from 65.6% as of Nov. 30. The index covered 5,588 pension funds as of those dates. As of Dec. 31, 2016, when the index covered 5,794 funds, the proportion running deficits was 74.9%.