The aggregate defined benefit (DB) pension funding ratio reached 129.8 per cent in September, the Pension Protection Fund (PPF) 7800 Index has revealed, marking a high not seen since December 2023.

The index revealed that there was a 2 per cent increase in estimated total assets held across the PPF-eligible DB universe in September, which PPF chief actuary, Shalin Bhagwan, attributed to global equity gains following an easing in trade tensions.

At the same time, there was a slight drop in gilt yields, which contributed to a 0.6 per cent increase in the estimated total liabilities within the DB universe.

This pushed the aggregate funding ratio up by 1.7 percentage points to a "strong" 129.8 per cent at the month end, while the aggregate funding position climbed to £255.1bn, following a £16.2bn improvement across the month.

Gallagher UK wealth consulting managing director, Vishal Makkar, highlighted the latest improvement as "a show of continued resilience", although he warned that this position will be tested over the next few weeks as the Autumn Budget may influence the long-term landscape for pension schemes.

With any change to tax relief and contribution rules set to influence growth, Makkar suggested that now is the time for trustees to reassess funding strategies and plan for the future.

Broadstone senior actuarial director, Jaime Norman, agreed, pointing out that "as we approach corporate year-end it is generally expected that the pension cost accounting position in company accounts will be generally better than the previous year".

"This will provide a good opportunity for corporates to review their pensions strategy; schemes will be grappling with the more onerous requirements of new funding code but could benefit from greater options for dealing with surpluses," he stated.

However, despite new options emerging, Standard Life business development manager, Charlotte Fletcher, pointed out that trustees are increasingly focused on securing member benefits through insurance-based solutions.

"Nearly half of DB schemes now favour buy-in as their endgame strategy, and of those, 40 per cent plan to approach an insurer within the next year—highlighting continued momentum in the bulk purchase annuity (BPA) market," she stated.

“As the Pension Schemes Bill and proposed surplus reforms reshape the regulatory landscape, trustees are weighing the potential benefits of surplus flexibility against the risks of uncertainty.

"With two-fifths expressing concern over whether reforms serve members’ best interests, many are prioritising the certainty of insurance-based solutions and avoid the risks of waiting for legislative clarity.”

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