Notes from PPF Information

 The PPF Purple Book

The Purple Book is published annually by the Pension Protection Fund and the Pensions Regulator. It provides comprehensive data and analysis on the defined benefit pensions' landscape. The Purple Book 2015 was published on 3 December 2015. The main body of the analysis in the Purple Book 2015 is based on new scheme returns for a dataset of 5,945 Defined Benefit (DB) schemes, covering 11 million memberships. This represents virtually all PPF-eligible schemes and universe liabilities. Complete 2015 information is not yet available for the remaining schemes and, hence, these have been excluded from the sample. The PPF estimates that there are 5,967 DB schemes altogether. Thus CH2M Hill is one of only 22 schemes (0.4% of the total) that have failed to produce an up-to-date Valuation Report.

Risk Analysis

The PPF has a Red-Amber-Green code to indicate level of risk. In 2015, it remained in the Green zone. If the risk is higher, it can adjust its investment strategy or levy parameters or reduce members’ pensions. This, unfortunately, is the one most likely to occur. As at 31 March 2015, the probability that the PPF will accumulate its target fund of £80 Billion by 2030 was estimated to be 88%, down from 90% at 31 March 2014.  The downside risk, the minimum reserve likely to occur before 2030 was estimated to be £5 billion, up from £4 billion.

Level of Compensation

In February 2016, the average pension paid to the 224,000 PPF members and dependants was £4,210 a year. 90% per cent of these are in receipt of (or have accrued) compensation of less than £9,100 a year. For comparison, the UK full state pension is currently £8,094 per year. Spouses and other dependants constitute 15% of all pensioners and 10% of compensation. The Normal Pension Age for 28% of pensioners and 34% of deferred members is 60, while 52% of pensioner and 60% of deferred members have a NPA of 65. The rest have other NPAs.

Recovery Plans

The average recovery plan length for schemes in the PPF universe was 8.5 years, and the average funding ratio was 82.5%. The HPS recovery plan length in 2008 was 21 years and the funding ratio 58%. In 2005, it was 15 years and the ratio 65%. In 2002, it was also 15 years and the ratio was 59%. The 2008 recovery plan is the one now being followed, as it has not been updated since.

Size of Deficit

The PPF gives details of assets and liabilities for schemes of various sizes. They are shown below for those in the range 1,000 to 4,999 members, such as the HPS, together with the average values for a scheme with the same size as the HPS.
       

HPS has assets that are a little above the average, but liabilities of twice the average, in part due to the 5% pa increase in pre-March 1999 pension accurals  and in part due to the high proportion of professionals in the membership.