The aggregate surplus of defined benefit (DB) schemes in the UK decreased by £5.3bn during October to £275.4bn due to a fall in bond yields, according to the latest update from the Pension Protection Fund (PPF).

The PPF 7800 Index, which provides the latest estimated funding position of DB schemes potentially eligible to enter the PPF, revealed that total scheme assets rose 0.9 per cent to £1,091.7bn, while liabilities increased 1.9 per cent to £816.3bn.

As a result, the funding ratio of the 4,838 schemes in the PPF 7800 Index fell by 1.3 percentage points to 133.7 per cent.

PPF acting chief actuary, Aaron Pang, commented: “Government bond yields fell slightly during October, increasing both asset and liability values. While scheme assets rose overall, gains were partially offset by weaker overseas equity markets.”

The update also revealed that the number of schemes in surplus fell by 27 to 3,832, meaning that 79.2 per cent of schemes in the universe were in surplus.

Broadstone senior actuarial director, Jaime Norman, said the dip in pension scheme funding in October came “just as corporates will be looking towards their year-end position".

“However, the overall picture continues to be one of strong financial health for many schemes as hedging positions minimise the impact of market volatility and geopolitical uncertainty," he added:

“The end of the year is typically the busiest period for schemes looking to secure an insurance transaction and protect their members’ benefits which strong funding levels will support.

“The increased activity of superfunds, high levels of competition within the insurance market and new surplus flexibilities mean corporates have more options than ever before, so it will be interesting to see what trends emerge with less than two months of the year to go.”

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