Current issues for the Pension Protection Fund

Transcription

1 Current issues for the Pension Protection Fund Occupational Pensioners Alliance 18 February 2010 Paul Reynolds Director of Corporate Affairs

2 Current key themes for the PPF What does the PPF mean for scheme members? PPF resilience in the downturn The challenge of scheme data

3 What does the PPF mean for scheme members? Overview of what we do The Pension Protection Fund was established to pay compensation to members of eligible defined benefit pension schemes, when there is a qualifying insolvency event in relation to the employer and where there are insufficient assets in the pension scheme to cover Pension Protection Fund levels of compensation. Also manage the FAS and FCF

4 What does the PPF mean for scheme members? Gwendolen Holloway Gwendolen is 88 years old and lives in Hove, East Sussex She work for Garrard for 14 years until she retied at the age of 65 Keep faith with the PPF is my advice to anybody who is lucky enough to be taken under their wing Her pension scheme, the Asprey Group Pension Scheme, had 1,163 members and transferred to the PPF in August 2008 She visited the PPF in January 2009 for our first Member Day

5 What does the PPF mean for scheme members? Current key statistics Over 12 million scheme members, in c.7,400 schemes, protected 188 cases with over 34,000 members have completed assessment 357 cases with just over 200,000 members in the assessment period 100,000 receiving PPF benefits (either from PPF or trustees)

6 PPF Resilience in the downturn Financial Highlights Deficit as at 31 March bn (88% funding ratio) Includes schemes in assessment at that date PPF s defensive investment approach yielded a return of 13.4% (including hedge) Estimated deficit has moved since 31 March 2009 Investment returns Changes in liabilities Impact of new claims

7 Movement in the PPF Deficit during 2008/09 Movement in PPF deficit from 31 March 2008 to 31 March Deficit at 31 March 2008 New claims 2008/09 Effect of change in assumptions on liabilities Levy income accrued in 08/09 Investment gains on PPF assets Other changes to assets and liabilities Deficit at 31 March

8 PPF Claims Characteristics Number of schemes or segregated parts having entered an assessment period Insolvency events post 31 March 2009 Insolvency events prior to 31 March2009 in surplus at assessment date Insolvency events prior to 31 March2009 in deficit at assessment date Count of insolvency events over quarter 0 Apr - Jun 2005 Jul - Sep 2005 Oct - Dec 2005 Jan - Mar 2006 Apr - Jun 2006 Jul - Sep 2006 Oct - Dec 2006 Jan - Mar 2007 Apr - Jun 2007 Jul - Sep 2007 Oct - Dec 2007 Jan - Mar 2008 Apr - Jun 2008 Jul - Sep 2008 Oct - Dec 2008 Jan - Mar 2009 Apr - Jun 2009 Jul - Sep 2009 Oct - Dec 2009 Financial quarter

9 PPF Resilience in the downturn Modelling financial futures PPF confident of long term ability to pay compensation Context of the funding ratio 2005/ / / /09 Assets 2,086m 4,409m 5,554m 9,330m Liabilities 2,429m 5,018m 6,071m 10,560m Funding Ratio 86% 88% 91% 88% Continuing development of the PPF s Long Term Risk Model

10 Recovery Profiles of the PPF 20.0bn 15.0bn 10.0bn 5.0bn 0.0bn bn bn 75th percentile of base Median of base 25th percentile of base 75th percentile of double-dip Median of double-dip 25th percentile of double-dip

11 The challenge of scheme data Background Poor scheme data significant challenge for the PPF (and FAS) Data about member records, scheme records and scheme rules Delays to the Assessment Process create uncertainty for scheme members and costs to levy payers Most ongoing schemes only consider data when a member retires; often not a priority

12 Why are schemes taking more than 2 years to complete the assessment period? Overarching theme of data quality Key reasons are: Legal issues Member data issues Repeated s143 valuations required Non-performing trustees or administrators Average of 9 iterations over 8 months to complete data interface for transferring schemes

13 Progress of schemes through assessment 100% 90% 80% 70% % of year's intake still in assessment % of year's cases completed in 3-4 years % of year's cases completed in 2-3 years % of year's cases completed in 2 years 60% 50% 40% 30% 20% 10% 0% Target 2005/ / / / /2010

14 The challenge of scheme data Responses Industry wide issue Only 19% of schemes have checked they have all fundamental common data for scheme members Reports of 5% premium on buyout for poor data Ombudsman has voiced concerns about data cases he sees Regulator consultation launched on 2 February Sets out standards for member records and steps for schemes that fall short Trustees and those responsible for administering workplace pensions will need to improve standards of record keeping.

15 Current issues for the Pension Protection Fund Occupational Pensioners Alliance 18 February 2010 Paul Reynolds Director of Corporate Affairs