Pension Schemes Further In Black As UK Recovery Continues

By Martin Croucher
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Law360, London (June 8, 2021, 12:16 PM BST) -- The funding position of Britain's workplace retirement plans improved again in May, the pensions compensation fund said on Tuesday, as the country edges closer to a full lifting of pandemic restrictions.

The Pension Protection Fund said that the total cash surplus of the country's 5,318 defined benefit pension schemes almost doubled to £94.6 billion ($133.7 billion) at the end of May, up from £53.7 billion at the close of April.

The monthly improvement comes after shocks inflicted on the market by the COVID-19 crisis plunged plans into record deficits in 2020. The recovery has mirrored the gradual lifting of rules and restrictions across the country to tackle the coronavirus outbreak. Remaining restrictions are set to end on June 21.

Lisa McCrory, the PPF's chief financial officer, said that market conditions are stable but warned that that could change.

"So far this year we've seen an improved position for U.K. defined benefit schemes. However, we remain alert to the continuously changing environment around us," she said.

The warning was echoed by retirement savings consultancy Buck, which said that the pensions surplus reflected a rise in asset values as a result of optimism in financial markets.

"There is, however, still clear evidence to suggest that the financial impact of the pandemic is far from over," Vishal Makkar, head of retirement consulting at Buck, said. "Indeed, the emergence of new virus variants and the potential threat of future waves may yet necessitate a return to stricter lockdown measures."

The total deficit of retirement schemes on the PPF's funding index was £176.3 billion in May 2020, when markets were in freefall at the start of the pandemic.

According to Tuesday's numbers, 2,449 pension plans were in deficit and 2,869 in surplus at the end of May 2021.

Looking only at those in deficit, their total funding shortfall at the end of May this year was £117.8 billion, down significantly on the £290.1 billion in the same month of 2020.

--Editing by Ed Harris.

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