DB schemes’ surplus rises by £48bn in December

This meant the surplus rose to £129.3bn at the end of December from £81.4bn in November.

Section 179 liabilities, the level of assets needed to secure PPF-level benefits with an insurer, were 107.7 per cent funded in December, up from 104.6 per cent in the previous month.

By the end of 2021, total assets in DB schemes stood at £1.82tn, while total liabilities were £1.69tn. There were 2,152 schemes in deficit and 3,063 schemes in surplus, the PPF stated.

The aggregate shortfall of the schemes in deficit at the end of December was £97bn, down from £125.9bn in the previous month.

Lisa McCrory, PPF’s chief finance officer and chief actuary, attributed the surplus increase to the “significant rise” in bond yields registered in December.

“The unpredictable fluctuations in the 7800 funding ratio over the past few months are a clear sign of the ongoing market volatility and the need for caution.”

Vishal Makkar, head of retirement consulting at Buck, noted that as schemes begin their third year of the Covid pandemic, the PPF figures “suggest that markets have found some degree of stability and really have learned to live with the virus”.

“Covid is still a potential source of volatility, as this latest Omicron spike has proved, but it’s no longer on the same scale as the initial impact it had in 2020,” he said.

Makkar believes the next phase of the pandemic for schemes “is likely to be shaped by the ongoing economic recovery from Covid”.

“Already, the Bank of England has shown its willingness to raise interest rates to fight inflation, as the UK economy drags itself back up to speed,” he said.

“Further involvement from central banks, more inflationary pressure, and continuing supply chain issues will impact many scheme sponsors and will all require careful thought and consideration from trustees in the year ahead.”