Pension Protection Fund publishes annual report and accounts for 2022/23

On July 14, 2023, the PPF published its annual report and accounts for 2022/23. According to the report, the PPF's funding ratio increased significantly to 156.0 per cent, up from 137.9 per cent in 2022. This growth was attributed to a fall of approximately 25 per cent in reported liabilities due to the increase in interest rates. While the PPF has an LDI strategy, the sharp interest rate rises in September 2022 had no adverse effect as the PPF manages its LDI strategy in house and was able to react quickly.

The Chancellor’s Mansion House speech given on July 10, 2023, announced a consultation in which the Government is seeking views on how DB schemes assets could be used to deliver good member outcomes whilst also supporting the wider economy. The PPF’s significant success in generating returns through growth assets whilst improving member security, has demonstrated that this is achievable, and the report says the PPF is willing to play its part in future Governmental strategies.

The report also notes that the PPF met its target to conclude uplifting payments and payments of arrears for 80 per cent of members affected by the judgment concerning the compensation cap in the 2021 Hampshire case, which held that PPF compensation should not be less than 50 per cent in respect of any individual.  

The report states that as a result of the Retained EU Law (Revocation and Reform) Act 2023 (REUL Act), there will be no potential liabilities arising from the judgment for members of schemes whose employer experiences a qualifying insolvency event after December 31, 2023. However, there is "some uncertainty" about the effect of the REUL Act on the potential liabilities arising from Bauer for periods on and from January 1, 2024, for members of schemes whose employer has experienced a qualifying insolvency event before that date. Bauer was a decision which called for a complex calculation of compensation taking into account national poverty levels. The PPF is working with the DWP to agree its approach to implementation.

The report also notes that in light of the increase in the cost of living, the PPF Board considered, but ultimately decided against, exercising its discretion to increase the rate of indexation for post-97 compensation for PPF members under powers conferred by the Pensions Act 2004. It will keep this position under review.