DB schemes’ surplus falls by £33bn in November

This meant the surplus decreased to £81.4bn at the end of November from £114.5bn in October.

Section 179 liabilities, the level of assets needed to secure PPF-level benefits with an insurer, were 104.6 per cent funded in November, down from 106.8 per cent in the previous month.

The pensions lifeboat noted that there was an increase in the funding ratio of 0.9 percentage points due to the update in the dataset, which now takes into account the Purple Book 2021, published earlier in December.

By the end of November the total assets in DB schemes stood at £1.84tn, while total liabilities were £1.76tn. There were 2,403 schemes in deficit and 2,812 schemes in surplus, the PPF stated.

The aggregate shortfall of the schemes in deficit at the end of November was £125.9bn, up from £103.4bn in the previous month.

Lisa McCrory, PPF’s chief finance officer and chief actuary, said: “We’ve used the dataset from our newly launched 2021 Purple Book to calculate this month’s 7800 Index. The aggregate surplus of the 5,215 schemes we protect continued to worsen, reducing from £114.5bn last month to £81.4bn.

“With almost half of the schemes now in deficit, the aggregate deficit increased by £22.5bn over the month to £125.9bn. This worsening in scheme funding is due primarily to recent decreases in bond yields and reminds us how market volatility can impact scheme funding levels.”

Vishal Makkar, head of retirement consulting at Buck, noted: “This time last year the aggregate deficit of the schemes in the PPF Index was £78.8bn, a testament to the impact of the pandemic in 2020 and its effect on the global economy.

“Still, this was an improvement on the £176.3bn deficit reported in May 2020, as the UK continued to endure its first lockdown,” he continued.

“Clearly, the pandemic has been a hugely difficult period for DB schemes and many of their sponsors, but overall, since the start of the year DB schemes’ funding positions have generally been on a more positive trajectory, as evidenced by today’s surplus figures, albeit with some volatility along the way.”

However, Makkar argued that the positive figures do not “mean the challenges of the pandemic are over”.

“With the proliferation of the new Omicron variant and the spectre of new lockdown measures in England looming, schemes still have a tricky path to navigate in 2022.

“These challenges aren’t only limited to the logistical and economic difficulties posed by the pandemic and rising UK inflation. Schemes also face a number of administrative and regulatory hurdles in the new year,” such as new legislation stemming from the Pension Schemes Act 2021 and a raft of regulation and guidance from the Pensions Regulator, he concluded.