The Pensions Regulator

Analysis on the defined benefit pension landscape published for the first time

Ref: PN06-41
18 December 2006

• Data and analysis from the Pensions Universe Risk Profile (PURPLE) released
• Provides a single and credible information source
• Enables changes in risk to be tracked over time
• Reinforces commitment to risk-based regulation

Comprehensive and vital information to help identify and manage risks surrounding UK-based defined benefit pension schemes has been published today (Monday) by the Pensions Regulator and the Pension Protection Fund.

The Purple Book pulls together data and analysis on the DB landscape providing the industry with a much needed single credible information source.

The report will be published annually to enable the regulator, PPF and importantly, employers and scheme trustees, to track changes in risk over a period of time.

Chairman of the regulator David Norgrove said: “This book starts to fill the information void that exists about the risks that defined benefit pension schemes are exposed to. Also, it is an important tool in helping us deliver regulation which is focused on those schemes that are most at risk.”

PPF chairman Lawrence Churchill added: “This is a much wanted resource for the pensions industry, advisors and analysts who need to identify risk as early as possible in order to address it accordingly. It is also essential for both the PPF and the regulator to ensure that we make decisions based on the best evidence available.”

One of the key objectives of the document is to provide an overview of the DB pension landscape, enabling risks surrounding scheme size, industry-type, level of funding, insolvency and asset allocation to be correlated and assessed effectively. In the future the Purple Book will contain crucial information on the PPF's operations such as the number and size of claims, the number benefiting from PPF payments, the scale of levy payments to the Fund and its assets and liabilities.

Editor's notes

1. The Purple Book is available on the Pensions Regulator website visit: www.thepensionsregulator.gov.uk and on the PPF website at www.pensionprotectionfund.org.uk
2. Data was sourced from a sample of around 5,800 schemes representing 12.6 million memberships and 85% of liabilities.
3. A majority of the schemes, 58%, are closed to new members, open schemes make up 31%. There are 41% deferred pensioners, 33% are pensioner members and 26% are members actively employed by the sponsor of their pension scheme.
   
4. The total aggregate S179 deficit for the sample schemes was approximately £33.8 billion as at 31 March 2006.
5. The Pensions Regulator is the regulator of work-based pensions in the UK, with wide-ranging and flexible powers under the Pensions Act 2004.
6. The Pensions Regulator’s powers include the ability to:
   • collect detailed scheme information;
   • issue improvement notices and third party notices, enabling the regulator to ensure problems are put right;
   • freeze a scheme that is at risk while the regulator investigates;
   • prohibit trustees who are judged not fit and proper to carry out their duties; and
   • issue a contribution notice or financial support direction.
   The Pensions Act 2004 also imposes a statutory obligation on 'whistleblowers' to report suspected breaches of the legislation to the regulator.
7. The Pension Protection Fund, which opened its doors to business on 6 April 2005, was set up under the provisions of the Pensions Act 2004.  It has been established to pay compensation to members of eligible defined benefit and hybrid pension schemes when there has been a qualifying insolvency event in relation to the employer, and where there are insufficient assets in the pension scheme to cover Pension Protection Fund levels of compensation.