Current issues for the Pension Protection Fund Occupational - - PowerPoint PPT Presentation

Current issues for the Pension Protection Fund

Occupational Pensioners’ Alliance – 18 February 2010

Paul Reynolds – Director of Corporate Affairs

• What does the PPF mean for scheme

members?

• PPF resilience in the downturn
• The challenge of scheme data

Current key themes for the PPF

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

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

• 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

“Keep faith with the PPF is my advice to anybody who is lucky enough to be taken under their wing”

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)

PPF Resilience in the downturn

Financial Highlights

• Deficit as at 31 March 2009 £1.23bn (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

Movement in the PPF Deficit during 2008/ 09

• 1230
• 486

257 173

• 1303

646

• 517
• 4000
• 3500
• 3000
• 2500
• 2000
• 1500
• 1000
• 500

March 2008 New claims 2008/ 09 E f f e c t

• f

change in assumptions

• n liabilities

Levy income accrued in 08/ 09 Investment gains on PPF assets Other changes to assets and liabilities Deficit at 31 March 2009

• 4000
• 3500
• 3000
• 2500
• 2000
• 1500
• 1000
• 500

Movement in PPF deficit from 31 March 2008 to 31 March 2009

Deficit at 31

PPF Claims Characteristics

10 20 30 40 50 60 70 A p r

• J

u n 2 5 J u l

• S

e p 2 5 O c t

• D

e c 2 5 J a n

• M

a r 2 6 A p r

• J

u n 2 6 J u l

• S

e p 2 6 O c t

• D

e c 2 6 J a n

• M

a r 2 7 A p r

• J

u n 2 7 J u l

• S

e p 2 7 O c t

• D

e c 2 7 J a n

• M

a r 2 8 A p r

• J

u n 2 8 J u l

• S

e p 2 8 O c t

• D

e c 2 8 J a n

• M

a r 2 9 A p r

• J

u n 2 9 J u l

• S

e p 2 9 O c t

• D

e c 2 9

Financial quarter Count of insolvency events over quarter

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

Num ber of schem es or segregated parts having entered an assessm ent period

PPF Resilience in the downturn

Modelling financial futures

• PPF confident of long term ability to pay

compensation

• Context of the funding ratio
• Continuing development of the PPF’s Long

Term Risk Model

91% £6,071m £5,554m 2007/ 08 88% 88% 86% Funding Ratio £10,560m £5,018m £2,429m Liabilities £9,330m £4,409m £2,086m Assets 2008/ 09 2006/ 07 2005/ 06

Recovery Profiles of the PPF

• £10.0bn
• £5.0bn

£0.0bn £5.0bn £10.0bn £15.0bn £20.0bn

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

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

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

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
• ver 8 months to

complete data interface for transferring schemes

Progress of schemes through assessment

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Target 2005/ 2006 2006/ 2007 2007/ 2008 2008/ 2009 2009/ 2010 % 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

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.’

Current issues for the Pension Protection Fund

Occupational Pensioners’ Alliance – 18 February 2010

Paul Reynolds – Director of Corporate Affairs