U.K. Purple Book Presents Latest Pension Data

February 3, 2010 (PLANSPONSOR.com) – The latest data on the impact of the worldwide economic slowdown on U.K. pension plans shows that the aggregate funding deteriorated from a £12.3-billion surplus in March 2008 to a £200.6-billion funding shortfall a year later.

The latest “Purple Book” released by U.K. pension regulators annually, that tracks plan funding, asset allocation trends, and a variety of other information, indicated that:

  • Plan size was an important indicator of funding level, with very large and very small plans by number of members showing materially higher levels of funding than those of intermediate sizes. Mature plans (those with a higher proportion of liabilities relating to pensioners) also show higher funding levels.
  • In 2009, the share of gilts and fixed interest increased to 37.1% from 32.9% in 2008. Meanwhile, the equity share dropped to 46.4% in 2009 from 53.6% a year earlier. In 2009, the share of other investments increased to 6% from 3.8%
  • More mature plans tend to invest more heavily in gilts and fixed interest and less in equities.
  • Better funded plans tend to hold a lower percentage of assets in equities.

“This year’s Purple Book highlights how the dramatic deterioration in the economic and financial environment during 2008/09, not just for the U.K. but for most major economies, led to heightened risk for the schemes in the PPF universe,” said Chief Executive Officer Alan Rubenstein of the Pension Protection Fund, in a press release. “The Purple Book continues to provide important information on trends in defined benefit pension schemes illustrating the risk these schemes pose to the PPF, in terms of underfunding levels and the likelihood of claims on us.”

The Purple Book 2009 is based on information relating to 97% of the defined benefit plans eligible for PPF compensation (6,885 plans, representing 12 million defined benefit pensions) and 99% of their estimated total liabilities.

The 2009 Purple Book is available here.