(January 11, 2011) — The aggregate funding position of the 6,560 schemes in the PPF 7800 index is estimated to have improved from a deficit of roughly $1.6 billion to a surplus of $33.7 billion at the end of December.
“During the month of December there was a 3.4% increase in assets mainly due to rising UK and global equities,” the PPF told the BBC. “However, liabilities also increased by 1% due to the combination of falling index-linked gilts and the time value of liabilities [schemes becoming more mature].”
According to the PPF, the number of schemes in surplus increased at the end of December last year to 2,607 (39.7% of schemes) from 2,358 at the end of November last year. There were 2,492 schemes in surplus at the end of December 2009. The funding level spike represented an improvement from the previous year when a surplus of £6.6 billion was recorded at December 31, 2009. Meanwhile, total liabilities were £961.7 billion, which was 9.7% over the year, the PPF said.
In recent news, according to Legal & General Investment Management America’s (LGIMA) Pension Fiscal Monitor, the fourth quarter (Q4) of 2010 saw pension funding ratios increase by 11%, a jump from the 2% increase seen in the third quarter. These results were echoed in standalone December survey as well. According to BNY Mellon Asset Management, the average funding status of American corporate plans rose 3.8% to 84.3% in the final month of 2010, the best number since March of last year. However, while the figures varied slightly from Legal & General’s measurements, BNY Mellon also reported a lackluster year-over-year change in funding ratio of just 0.8%.
Looking forward, BNY Mellon’s Peter Austin noted in a release that “…we expect US plan sponsors to continue efforts to closely manage plan funding volatility. In particular, we believe adoption rates for risk reduction programs based on target funding levels will increase, especially in the presence of higher interest rates and strong equity returns.”
<p>To contact the <em>aiCIO</em> editors of this story: Kip McDaniel at <a href='mailto:kmcdaniel@assetinternational.com'>kmcdaniel@assetinternational.com</a> and Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a></p>