The Purple Book provides a comprehensive analysis of the UK’s Defined Benefit (DB) pension schemes. It is published annually by the Pensions Protection Fund (PPF).
Below are some highlights from the 2024 report. We have also pulled out the metrics relevant to smaller schemes.
- Number of schemes. There are now 4,974 DB schemes in the UK, compared to 5,063 in 2023. The reduction is mainly due to schemes winding up, but also reflects scheme mergers and schemes entering the PPF.
- Number of members. Just under 9 million people are active, deferred or pensioner members of these schemes.
80% of schemes – just less than 4,000 – have fewer than 1,000 members each and are considered small schemes. Schemes with fewer than 100 members are sometimes called ‘micro’ schemes. 38% of total schemes fall into this category which means there are 1,852 micro schemes in the UK.
- Assets. The small schemes, which each have fewer than 1,000 members, make up just 10% of the total assets of all UK DB schemes (£1.167 trillion). The 1,852 ‘micro’ schemes add up to £12.6 billion of assets, which is just over 1% of the total assets of all DB schemes. In contrast, the combined assets of the 162 ‘mega’ schemes (each with over 10,000 members) make up 61% of the total.
As shown in the chart below, splitting the universe by the size of the total scheme assets shows that more than 75% of all schemes are smaller than £100m and around 60% less than £50m.
- Asset allocation: Almost 70% of total scheme assets are now invested in bonds, reflecting a continued trend towards de-risking. Total equity holdings have decreased further from 23% in 2023 to 18% in 2024. Smaller schemes tend to have lower allocations to bonds than larger schemes.
- Schemes are estimated to be better funded compared to last year on a full buy-out measure. Micro schemes have the highest funding levels, likely associated with the asset allocations at this end having higher weightings to equities.
- Risk transfer: The amount of bulk annuity deals was the highest ever in 2023 measured by assets transferred. This trend continued through 2024 with over 300 transactions taking place, the biggest number to date. This also included a significant number of transactions smaller than £100m.
Source: https://www.ppf.co.uk/news/Purple-Book-2024
MHM view/commentary
These figures highlight the ongoing stability and improvement in the funding of DB schemes at all sizes. It also shows the importance of endgame planning to take advantage of the various risk management solutions available.
Key takeaways for clients:
- Funding. Check your buy-out or solvency status with your scheme actuary.
- Investment. Review your investment strategy; specifically, does it reflect your funding status and your end game plan.
- Governance and expertise. Would a professional trustee make your end game planning more robust?