The Pension Protection Fund (PPF) paid out £1bn in member compensation for the first time ever in 2020/21, up from £860m the previous year, its 2020/21 Annual Report and Accounts have revealed.

The payments were made to 179,500 of the PPF’s 288,000 members who have already retired or are receiving survivor benefits.

Strong investment performance and “rigorous” risk management saw the pension lifeboat’s funding position increase by 13.9 percentage points to 127.3 per cent over the year, according to the report.

Furthermore, the PPF’s reserves rose by £3.9bn to £9bn and its probability of success increased from 83 per cent to 95 per cent, its highest ever level.

Probability of success measures the PPF’s progress towards achieving its funding objective of being 110 per cent funded at its funding horizon, currently set at 2030.

The report and accounts revealed that the PPF’s assets under management rose by £2bn to £38bn, while its growth assets returned 17.6 per cent (£3.7bn), its largest ever return on this investment portfolio.

“Our greatest risk remains the uncertainty around future claims following employer insolvency, especially in this challenging environment,” commented PPF CEO, Oliver Morley.

“Despite our strengthened funding position, we’re mindful that many of the schemes we protect have substantial deficits which could, if they were to claim, have a material impact on our reserves.”

PPF CFO and chief actuary, Lisa McCrory, added: “Our priority remains to protect the financial futures belonging to our current and future members, and reduce the burden of future claims on our levy payers.

“Our exceptional investment performance over the past financial year has not only allowed us to improve our funding position and grow our reserves, but has put us in a very strong position to take on future claims that could materialise as a result of the pandemic.

“We hope our strengthened funding position will reassure our current and future members that we continue to be an essential lifeline for them, and we call on trustees of the schemes we protect to remind their members of the vital protection we provide so they know their pensions are protected if the worst were to happen.”

Share Story: