DB pension surplus rises by nearly £5bn in June

The aggregate defined benefit (DB) pension scheme surplus on a section 179 basis increased by £4.8bn to £473.6bn in June, the Pension Protection Fund’s (PPF) latest 7800 Index has revealed.

During the month, both assets and liabilities increased, with the PPF stating the primary driver behind the increases was a small decline in yields on fixed-interest gilts.

Scheme assets rose from £1,418bn to £1432.5bn in June, while liabilities increased from £948.8bn to £958.9bn over the same period.

Despite the improved aggregate surplus, DB schemes’ average funding ratio remained the same at 149.4 per cent.

At the end of June, there were 451 schemes in deficit and 4,599 schemes in surplus.

The deficit of the schemes in deficit was £3.5bn at the end of the month, down from £3.6bn at the end of May.

Commenting on the update, PPF chief actuary, Shalin Bhagwan, said: “The story of the past month has largely been one of stability with the estimated funding ratio staying level with its position at the end of May - at 149.4 per cent - as a 1.1 per cent increase in liabilities was matched by an equal increase in assets held by eligible DB schemes.

“The primary driver behind the increase to both the liabilities and the assets was the small decrease to yields on fixed-interest gilts, after the Bank of England hinted that a cut in policy rates might be on the cards in August.

“As a result of these minor movements, the aggregate surplus of eligible DB schemes is estimated to have increased over the month to £473.6bn at the end of June, up £4.8bn from the end of May, while the deficit of the schemes in deficit is estimated to have fallen by £100m to £3.5bn.”

Broadstone senior actuarial director, Jaime Norman, added that while the latest update continued the theme of stability in the DB pension scheme funding landscape, trustees and scheme sponsors “cannot afford to become complacent”.

“There remain several uncertainties in the market around the funding code, the use of surpluses and the S37 court case while wider geopolitical events may also cause some turbulence,” Norman continued.

“Despite the rush to buyout through a record year in 2023, there will still be a sizeable majority of schemes that will need to deal with these issues in due course. It is reassuring that the new Labour government has indicated continuity as its principal direction of travel, so we are not expecting any wholesale changes.

“Early engagement with advisers will help avoid unwanted surprises so schemes can carry on their journey to their desired endgame option.”

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