A billion reasons to value the Pension Protection Fund (PPF)

by Christopher Shortt   •  

The PPF’s 2020/21 Annual Report and Accounts [1] reveals that it paid out £1 billion in member compensation in the past financial year – the first time that particular mark has been reached.

Strong investment performance, coupled with rigorous risk management, saw its funding position increase by 13.9% to 127.3%, with reserves up to £9 billion (£5.1 billion in 2019/20). The PPF now has assets under management of £38 billion (up from £36 billion). It estimates the value of existing liabilities to pay compensation to members at £28.5bn.  

Standout facts and figures from the Report and Accounts include:

  • An overview of PPF funding:

  • A reminder of its strategic priorities for the three-year period 2019-2022:
    • Sustainable funding in volatile times
    • Built for innovation
    • Brilliant service for members and schemes
    • The best of financial and public services cultures
    • Clear value for money
  • How the PPF has performed against its 2020/21 Business Plan, with nearly all planned activities / milestones having been achieved subject to one notable exception relating to the Hampshire judgment where it is observed that “We’ve increased payments to the vast majority of capped members using the Hampshire methodology. We were unable to go any further pending the outcome of the legal challenge (see pages 20-21)”.
  • Risks faced by the PPF, including Covid and court rulings.
  • Action taken on diversity, with 88% of employees saying that the organisation encourages all aspects of diversity (up from 81% last year).
  • Costs per member down from £57 (2020) to £53 (2021).
  • The PPF has updated its SIP to outline principles for stewardship, taking financially material considerations into account in investments – including ESG risks, and in particular climate change – and to detail how the PPF monitors their external fund managers. The PPF’s Equity portfolio has reduced its carbon footprint by 16 per cent over the year.
  • New claims remain low and were similar to last year.

Video reviews of the year and the PPF’s financial performance, from their Chief Executive and Chief Financial Officer, are available online [2].

The report also includes a helpful illustration of the measures that the PPF uses to monitor its activities, on page 12, an at-a-glance summary of the compensation the PPF provides, on page 119 and member data with compensation amounts, on page 121.

[1] Annual Report and Accounts 2020/21 (publishing.service.gov.uk)

[2] Protecting our members in uncertain times | Pension Protection Fund (ppf.co.uk)

Further reading

Investing in future pension administrators

by Troy Ramsey   •  

The road to buyout – an actuarial perspective

by David Lucas   •  

Pandemic paves the road to DB buyout

by Matthew Masters   •  

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