PPF pulls out 25% investment return through liability hedging

The Pension Protection Fund (PPF) produced a return of 25% on invested assets in the year to 31 March 2012, which it attributed to its sophisticated liability matching strategies. It said the return is more than sufficient to match a rise in liabilities in what have been turbulent financial markets. At the end of March 2012, the PPF has a surplus of £1.07 billion over liabilities and £11.1 billion of assets under management – a rise of £4.7 billion over the previous year. Its membership has increased to 128,000 people, and it took on assets of almost £2.5 billion from 147 schemes which transferred into the PPF in the year. At the end of 2012, a further 293 pension funds, with assets of £5.3 billion and liabilities of £7.07 billion, are undergoing PPF assessment. PPF chief executive, Alan Rubenstein, commented: “While we are still on course to meet our aims of being selfsufficient by 2030, the probability of achieving this fell during the year from 87% to 84%. Although this fund is still above our comfort level, we remain vigilant about events which will reduce this probability even further.” He added that the PPF’s programme of interest rate and inflation hedging protected it from the effect of falling interest rates on its funding position because the hedging assets kept pace with the increase in liabilities.