Aggregate funding of private sector DB schemes was at almost 150% at the end of the second quarter of the year.
The latest figures show that the aggregate surplus of the 5,050 schemes in the PPF 7800 Index is estimated to have increased over the month to £473.6bn at the end of June.
This is up from a surplus of £468.8bn at the end of May, according to the PPF, and sufficient to keep the aggregate funding ratio at 149.4% between the end of May to the end of June.
Total assets were £1,432.5bn and total liabilities were £958.9bn. There were 451 schemes in deficit and 4,599 schemes in surplus.
Shalin Bhagwan, chief actuary at the PPF, said: “The story of the past month has largely been one of stability with the estimated funding ratio staying level with its position at the end of May... as a 1.1% increase in liabilities was matched by an equal increase in assets held by eligible DB schemes.
“The primary driver behind the increase to both the liabilities and the assets was the small decrease to yields on fixed interest gilts, after the Bank of England hinted that a cut in policy rates might be on the cards in August.”
Jaime Norman, senior actuarial director at independent consultancy Broadstone, said: “Trustees and scheme sponsors cannot afford to become complacent. There remain several uncertainties in the market around the funding code, the use of surpluses and the section 37 court case while wider geopolitical events may also cause some turbulence.
“Early engagement with advisers will help avoid unwanted surprises so schemes can carry on their journey to their desired endgame option.”
Sion Cole, head of European institutional OCIO at BlackRock, said the continuation of a supportive market environment in June reinforced the opportunity for trustees to secure the long-term fully funded status of their schemes.
“In this market environment where rates remain higher for longer, trustees are increasingly focusing on their long-term strategy and identifying innovative ways to continue utilising their surplus to improve member outcomes,” he said.
Vishal Makkar, managing director of UK wealth consulting at Gallagher, said that after years of challenges for DB pensions, the past year has marked a significant positive shift for most schemes, and it was crucial to stay proactive in setting endgame targets and timelines.
But he warned that interest rate cuts in the second half of the year could introduce some volatility in scheme funding positions.
He added: “Completing de-risking transactions remains a top priority for many schemes, but regardless of the long-term objectives, trustees and sponsors share common priorities – whether that’s managing risks to reduce volatility or ensuring high-quality administration to keep their members satisfied.
“Additionally, the potential for interest rate cuts in the second half of the year could introduce some volatility in scheme funding positions, which trustees should consider now.”
Further reading
Support for government surplus access plans (11 April 2024)
DB schemes end Q1 in strong surplus position (10 April 2024)
What can DB schemes do with funding surpluses? (26 February 2024)
