PPF clarifies scheme funding data calculation methodology and implications

Article summary

The Pension Protection Fund (PPF) has provided further clarification on its methodology for calculating scheme funding data. Utilising enhanced asset allocation data from The Pensions Regulator (TPR), the PPF now applies a wider range of market indices in its asset roll-forward calculations. This granular data reveals that schemes were better hedged against the Liability-Driven Investment (LDI) crisis than previously assumed, resulting in less significant funding level improvements following the gilt yield spike. The PPF has also refined its approach by considering cashflows when estimating asset and liability values, aligning with the Office for National Statistics (ONS) and TPR. Additionally, the PPF notes a reduction in the universe size over the past year, partly attributed to risk transfer deals. These developments reflect an industry-wide learning process and provide a more accurate picture of LDI investments held by UK defined benefit (DB) schemes.