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DB lifeboat fund in £4bn surplus despite BHS collapse

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The Pension Protection Fund has a surplus of £4.1bn, a funding ratio of 116.3 per cent, its annual report shows.

The defined benefit lifeboat fund, which is funded by a levy on schemes, had to take on the pension assets and liabilities of failed retailer BHS, which collapsed in the spring.

BHS as the largest of the 47 schemes – and 10,000 members – to enter the PPF over the last year.

£616m was paid out in 2015/16. The PPF has paid out £2.4bn since it was founded in 2005 and has £23.4bn in assets.

Chief financial officer Andy McKinnon says: “We had a successful year despite the challenging economic backdrop. Our robust strategy has put us in a strong position to manage the uncertainties ahead and our long-term risk model predicts that we will achieve financial self-sufficiency by 2030 in 93 per cent of scenarios.

“Members of defined benefit pension schemes in the UK can be reassured that we will protect their financial future should their employer fail.”

AJ Bell senior analyst Tom Selby says: “While the PPF’s finances are clearly robust at the moment, significant challenges may lie ahead. Its funding position could come under severe strain if, as many predict, the Brexit vote sends the economy into a tailspin and pushes more sponsoring employers into insolvency.

“The PPF, like DB schemes, is also a hostage to shifts in life expectancy. If people continue to live longer that will put extra pressure on its ability to pay pensions to members of failed schemes in the future.”

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