The assets surplus of 6,560 corporate pension funds in UK covered by the Pension Protection Fund (PPF), saw their surpluses over liabilities jump by 100 percent to £46.1 billion in January 2011, as higher yields of Gilts more than offset the losses in equities.
In a statement on Tuesday, the PPF – whose mandate is to compensate members of pension schemes if their sponsoring companies fail, said that it has posted a surplus of 48.1 billion ($74.3 billion), compared to £21.7 billion recorded in December.
The schemes 15 year Gilts gained by 26 basis points ensuring a higher margin over corresponding liabilities.
Majority of Britain’s defined benefits pension schemes – managing a total of £973 billion of assets, pay a premium to the PPF – which manages the schemes it takes over.
The scheme has been recording a deficit since May last year and this is the second consecutive month when it showed a surplus.
PPF surplus or deficit depend on a number of factors, including yields on debts or bonds. When yield’s go up, liabilities shrink and vice-versa.
However, total assets shrank by 1 percent in January over the last month as global and UK equities markets dipped.
The total funding ratio – determined by calculating the ratio of assets and liabilities – improved to 105 percent from 102.3 percent over the past one month.
A total of 2,864 of the funds were having surpluses while the rest 3,696 recorded deficits in the PPF scheme.