UK defined benefit (DB) pension funding levels remained strong in June despite a slight dip amid market volatility, with an aggregate surplus of £175bn at the end of the month, according to PwC’s Low Resilience Index.

This tracks schemes based on a low-risk income-generating investment strategy, which should mean the pension scheme is unlikely to call on the sponsor for further funding.

In addition to this, PwC’s Buyout Index, which measures the estimated cost for schemes to fully insure their liabilities with an insurer, also recorded a surplus position of £95bn.

Whilst this marked a slight drop from last month's £120bn buyout surplus, and the funding ratio also fell from 113 per cent to 109 per cent, PwC said that the average DB surplus remains "significant".

“The strong position of the UK’s DB pension schemes reflects a trend in recent years of higher funding levels and higher resilience of investment strategies to market volatility," PwC pensions partner, Saye Mkangama, said.

"This strength means that sponsors and trustees are able to explore the opportunities presented by the shifting landscape with more certainty than has been the case in the past."

PwC said that the continued DB surpluses will also be a key focus for government, with potential changes to DB surplus rules currently working through parliament as part of the Pension Schemes Bill.

These changes, according to PwC, could provide access to up to 25 per cent of DB scheme assets over time, with many schemes already revisiting their plans in light of these proposed changes.

And whilst market practice is still emerging, and for some insurance buyout will remain the right answer, Mkangama said that the firm expects the total amount of surplus released to be significantly higher than estimated in the government’s own impact assessment.

Adding to this, PwC pensions covenant partner, Katie Lightstone, said: “For many sponsors of well-funded schemes, their greatest risk now may be closing the door to future opportunity.

"It would be wise therefore, to fully consider the implications and options now on the table, before proceeding with an irreversible move to buyout.

"The pensions bill could also see fundamental changes to how pension schemes are viewed in a deals or restructuring situation. In these cases, early engagement and re-assessing the pension scheme will be even more crucial."

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