Defined benefit pension funds in the U.K.'s Pension Protection Fund, London, had a record 12% fall in liabilities in the past fiscal year, according to its latest "Purple Book," published Thursday.
Also known as The Pensions Universe Risk Profile, the report from the lifeboat fund for defined benefit plans of insolvent U.K. companies found for the first time a majority of pension funds no longer providing benefit accruals, with 51% frozen up from 48% the previous year.
By contrast, 21% of the 5,131 funds covered by the PFF are open and 41% are closed to new participants but still accruing benefits. The pension funds that are still open tend to be larger in participant numbers, the report said.
The declining universe of PPF-covered funds, down from 5,220 in 2021, reflects several trends: plans winding up, plan mergers, and those entering PPF assessment, the report said.
Of the 9.6 million participants in the 2022 report's universe, 43% are retired, 47% deferred and 10% active.
The improved funding position of PPF pension funds led to a surplus of £193 billion ($265.3 billion) in the year ended March 31, compared to £46.9 billion the year before.
The 113.1% aggregate funding ratio compared to 102.8% the previous year was attributed mainly to higher gilt yields driving down liability values, and large increases in equity values.
Pension funds covered by the PPF continued investing 72% of assets in bonds and 19% in equities, the report found. The proportion of assets invested in U.K. equities fell to a record low, below 10%.
Within bonds, index-linked bonds continued to represent the largest proportion at 47.8%, followed by 30.2% corporate bonds and 22% government fixed-interest bonds.
Lisa McCrory, chief finance officer and chief actuary at the PPF, said in a statement that the PFF can now reduce levy payments from plan sponsors. "We expect to collect £200 million in levy in the year 2023/24, nearly halving the levy collected in the previous year."
"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," Ms. McCrory said.
