The aggregate deficit of the 5,588 pension plans in the Pension Protection Fund’s PPF 7800 Index has fallen to £38.7 billion ($51.1 billion) at the end of September, from £65.3 billion at the end of August, raising the funding level to 97.7% from 96.1% a month ago, and from 94.2% at the same time last year.
The PPF said the number of plans in deficit decreased to 3,437, representing 61.5% of all the plans, down from 3,562 plans, or 63.7%, at the end of August, and from 3,698 plans, or 66.2%, at the end of September 2017. It also said the number of plans in surplus increased to 2,151, or 38.5% of all the plans, from 2,026 (36.3%) at the end of August, and 1,890 plans (33.8%) at the same time last year.
The total surplus of the plans that were in surplus increased to £131.6 billion from £123.2 billion at the end of August, and from £104.7 billion at the end of September 2017. Meanwhile, the aggregate deficit of all plans in deficit decreased to £170.3 billion from £188.5 billion at the end of August, and £200.5 billion at the end of September 2017.
Liabilities decreased 2.3% during September, while conventional 10-, 15- and 20-year gilt yields rose by 15 basis points, 14 basis points, and 14 basis points, respectively, and index-linked 5-15 year gilt yields rose by 9 basis points. Assets decreased 0.8% due to the impact of lower bond prices.
And for the year to September, conventional 10- and 15-year gilt yields were up 17 basis points, and 4 basis points, respectively, while 20-year gilt yields were down 1 basis point, and index-linked 5-15 year gilt yields were up 11 basis points. The FTSE AllShare Index was rose 1.1%, and the FTSE All-World Index was up 7.6% during the same period.
According to the PPF, equity markets and gilt yields are the main drivers of funding levels, and liabilities are sensitive to the yields available on conventional and index-linked gilts. Liabilities are also considered time-sensitive because even if gilt yields were unchanged, plan liabilities would still increase as the point of payment approaches.