The Purple Book - DB Pensions Universe Risk Profile 2012
This is the seventh edition of the Pensions Universe Risk Profile (The Purple Book), a joint annual publication by the Pension Protection Fund (the PPF) and the Pensions Regulator (the regulator) which focuses on the risks faced by Defined Benefit (DB) pension schemes, predominantly in the private sector.
The main focus in each year’s Purple Book is the position at the end of March for the year in question, and a comparison of how risks have changed for this year. The economic and financial market environment deteriorated somewhat over the 12 months to March 2012, with little subsequent sign of improvement:
UK GDP fell by 0.2 per cent year-on-year in the first quarter of 2012.
Insolvency Service statistics showed that the number of company liquidations rose a little in the year to Q1 2012 but other company insolvencies (receiverships, administrations, and company voluntary arrangements) edged lower.
The Bank of England kept its policy rate unchanged at 0.5 per cent but increased Quantitative Easing to £325 billion from £200 billion.
The FTSE all-share index fell by 2 per cent in the year to March 2012 after a 55 per cent increase between March 2009 and March 2011.
10-year gilt yields declined to 2.2 per cent from 3.7 per cent while 10-year AA corporate bond yields fell to 3.7 per cent from 4.9 per cent.
Scheme funding on a s1791 basis deteriorated markedly between end-March 2011 and end-March 2012 – the funding ratio (assets divided by liabilities) fell from 1002 per cent to 83 per cent.