UK DB schemes in surplus for first time in almost 2 years - PPF

The UK’s defined benefit (DB) pension schemes registered a surplus of £14.6bn at the end of February, flipping from a deficit of £65bn one month prior, according to the Pension Protection Fund (PPF) 7800 Index.

The figure represented the first time in nearly two years that the position of the 5,318 UK DB pension schemes listed on the index had moved into a surplus, as the month saw the overall funding position of the PPF 7800 Index improve to 100.8 per cent from 96.5 per cent.

The figures also show a marked improvement from this time last year, when a deficit of £124.6bn was recorded at the end of February 2020.

Total DB scheme assets came in at £1,740.2bn, down from £1,808.4bn in January, while total liabilities stood at £1,725.6bn, down from £1,873.4bn.

Even so, the number of schemes in deficit still outweighed the number in surplus, with 2,839 schemes in deficit and 2,479 schemes in surplus by the end of February.

Among the schemes in deficit, the amount they fell short was £154.4bn by the close of the month, an improvement on the £212.4bn figure registered at the end of January.

PPF chief finance officer and chief actuary, Lisa McCrory, said: “For the first time since April 2019, the position of the 5,318 UK DB pension schemes moved into a surplus of £14.6bn and the overall funding position of the PPF 7800 Index improved to 100.8 per cent in February 2021.

“Improvements were driven by an increase in bond yields which reduced the value of bonds and led to a fall in the value of liabilities and assets. While this is welcome news, it’s a reminder of how sensitive funding is to yield movements as many schemes don’t completely hedge this risk. Despite this strong position, we recognise the situation remains uncertain.”

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