Alan Rubenstein joined the Pension Protection Fund as chief executive in April 2009, following a long and distinguished career in investment banking and asset management. Sara Benwell caught up with him to find out the latest at the PPF.

I meet with Alan Rubenstein, chief executive of the Pension Protection Fund, for breakfast on the day the latest PPF 7800 figures are due out.

He can’t tell me the specific numbers yet, but he can say that the picture is pretty bleak. And that pension scheme funding is not going as well as people would hope.


Three-quarters of an hour later we’re still putting the world to rights and the figures are live. As it turns out, pension scheme funding has deteriorated over the previous month. The aggregate deficit of the 5,945 schemes on the PPF 7800 Index is estimated to have increased to £322.8bn and schemes’ collective funding ratio worsened from 80.5% to 79.8% since January.

Rubenstein puts this down to schemes continuing to pin their hopes on a rise in interest rates.

He says: “If you look at what’s happened to returns and interest rates, compared to what people were assuming ten years ago, you can clearly see it’s not that companies haven’t been putting money in.

“Deficit reduction contributions are around £15bn or so per annum. But rates have continued to grind down and schemes haven’t wanted to believe it… We would encourage schemes to face up to that reality.”

Rubenstein thinks the solution is threefold.

He counsels trustees to engage with their employer. While many sponsors may think that rates are artificially low and will soon rise, he points out that trustees have a responsibility to have the difficult conversation about what happens if they don’t.

He says: “The scheme might do the right thing and then the employer turns up with his actuary and says ‘no, of course rates are going back to 6% and we’re going to earn 8% on our equities so therefore the problem will go away’.

“What we’ve learnt is that just hoping that will happen doesn’t make it so. It’s  pretty clear that any rise from here on in is likely to be gradual. Until such times have changed the market is telling you its expectations of long rates are not where you’d like them to be.”

The second area of focus should be risk management. Rubenstein believes schemes have made some progress on this but have a long way to go.

He is also keen to debunk the myth that the PFF is anti-buyout. He says: “As far as I’m concerned, if a scheme is bought out with an insurer that means the members are essentially being guaranteed the benefits that they’ve being promised and won’t fall into the PPF. How could that be a bad thing?”

There are fewer than a thousand schemes in surplus on a section 179 basis, which measures their ability to secure PPF-level benefits with an insurer. The picture is more stark when you consider things through an insurance lens. The average scheme is about 64% funded on a buyout basis.

The third thing to recognise is that not all schemes will make it. He says: “Even with a rise in interest rates there are a rump of schemes that are so poorly funded that they are never going to make it. To my mind it would make sense for us to accept that fact and figure out what the solution is.”

It might not be the most uplifting end to a breakfast, but ultimately Rubenstein is a pragmatist. If schemes don’t face up to the thorny reality of continuing low interest rates, we could see an ever greater number heading for disaster.

Interview by Sara Benwell