The aggregate defined benefit (DB) pension funding level for the UK social housing sector has remained largely stable, First Actuarial has found, with an increasing number of schemes surveyed now in surplus.

The annual Financial Reporting Standards (FRS) 102 survey, now in its sixth year, is the largest DB pension survey of the UK social housing sector and highlighted a marked improvement in social housing pension funding.

In particular, the research, which covers more than £8.7bn in pension accounting liabilities, found that the total aggregate FRS 102 funding level remained largely stable over the year to 31 March 2025, at around 110 per cent.

In addition to this, the total aggregate funding level across all schemes has shown a positive trend over the last five years, with the overall funding level increasing from approximately 90 per cent in 2021 to around 120 per cent by 2025.

The research also found that one in four schemes surveyed had an accounting surplus as at 31 March 2025, compared to one in 20 just four years ago.

However, there were variations, as whilst the aggregate funding levels for Social Housing Pension Scheme (SHPS) and the ex-SHPS schemes remained relatively stable, with funding levels hovering around 90 per cent, the aggregate funding level for Local Government Pension Scheme (LGPS) funds covered increased "significantly".

According to the survey, the aggregate funding level for the LGPS funds it covered rose from 83 per cent in 2020 to around 146 per cent in 2025.

First Actuarial attributed the difference in performance to the assets behind these funds, pointing out that the LGPS funds hold "significant" allocations of growth assets.

In particular, the company argued that schemes with a higher allocation to equities (such as LGPS funds) are likely to have delivered the strongest FRS 102 funding results.

First Actuarial partner, Dale Walmsley, also said that LGPS funds’ open structure and investment approach had been key drivers of success.

“The standout funding growth seen in the LGPS contrasts with more static positions of other housing pension schemes,” he noted.

“A big reason for this is the investment of LGPS funds in return-seeking assets. LGPS is open to new entrants, whereas other schemes, such as SHPS, have ageing memberships.

“This opens up a longer-term and less cautious approach to investment for LGPS,” explained Walmsley.

While the 146 per cent figure from First Actuarial applies specifically to housing association employers participating in LGPS, the results also align closely with wider sector trends, as recent analysis of the 87 LGPS funds in England and Wales by Isio found an aggregate funding level of 147 per cent at 30 September 2025, marking a record high for the public sector pension scheme.

At the time, the consultancy described the situation as a “unique opportunity” for employers to reassess their long-term strategies, as strong asset performance, rising gilt yields and moderating inflation have combined to push funding to unprecedented levels.

And some employers are already looking to take action, as First Actuarial's survey found that some LGPS sponsors are actively considering triggering cessation given the material improvements in funding.

Walmsley added that the annual survey had become an important tool for housing associations in managing their pension risk and regulatory responsibilities.

However, First Actuarial clarified that accounting valuations are not used to determine cash funding, explaining that, instead, liabilities are valued under different (sometimes more prudent) assumptions, and that there are different (even more prudent) assumptions for exit valuations.

Given this, it warned that, ahead of the accounting year-end, financial assumption setting is only one part of the equation.

"For a start, there are demographic assumptions to set as well," First Actuarial's report said.

"The impact of past and pending court rulings may well prove crucial for employers in the social housing sector.

"While government intervention may provide the answer to the issues arising from the Virgin Media case, the outcome of the Verity Trustees v Wood court case will remain a real issue for many schemes."

---