Britain’s Public Equity Boosts Pension Protection Fund’s Ratio

Benefits lifeboat took on highest total obligations in Carillion, Toys R Us, and Hoover liabilities.

UK benefits lifeboat the Pension Protection Fund ($39 billion) returned 2.8% in fiscal 2017-18, giving its funded status a short boost.

The fund, which takes on the pension obligations of suffering defined benefits plans, is now 122.8% funded, well above its 91% target. The fund also has £6.7 billion in reserves.

Over the year, the rescue plan absorbed the pensions of Carillion, Toys R Us, and Hoover, obtaining £1.2 billion in total liabilities. This is the highest combined value the protection fund has acquired to date.

At 11.2%, public equity was the top contributor to the fund’s fiscal gain, despite January’s selloff. The company did not disclose the returns for its other allocations in its fiscal report. The fund allocates 60% to cash and bonds, 19.6% to alternatives, which includes property, 10.5% to hybrid assets (investments with both liability hedging and growth asset attributes), and 9.4% to public equity.

Returns were smaller than the last fiscal year, which generated 3.9%.

Andy McKinnon, the protection fund’s chief financial officer, was pleased with the “strong financial results,” but expressed concerns with the pension world’s risks in a statement. McKinnon assured that the fund’s performance and growth proves it is keeping track of these worries.

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