The aggregate surplus of defined benefit (DB) pension schemes in the UK increased by £0.2bn to £264bn in June, the latest figures from the Pension Protection Fund (PPF) have shown.

The PPF’s 7800 Index revealed the aggregate funding ratio stood at 131.1 per cent on 30 June, down marginally from 131.2 per cent at the end of May.

Total scheme assets increased by 0.3 per cent, from £1,109.6bn to £1,112.6bn, while total liabilities also rose by 0.3 per cent, from £845.8bn to £848.6bn.

However, the combined shortfall of schemes in deficit increased by £1.4bn during the month, rising from £20.4bn to £21.8bn.

PPF acting chief actuary, Aaron Pang, said: “Market conditions were relatively stable over June. Slightly lower bond yields led to modest increases in liability values, while rising equity markets contributed to a small improvement in the overall surplus position.

“Against this backdrop, the aggregate funding position of schemes in the PPF 7800 Index remained broadly unchanged.

Also commenting on the update, Gallagher managing director of UK wealth consulting, Vishal Makkar, said the figures demonstrated that aggregate funding was not the main challenge facing DB schemes, with trustees instead needing to determine how to use surplus assets.

“The UK’s DB schemes have kept a level footing, with the aggregate surplus rising to £264bn.

“Funding levels are not the issue. But how trustees should allocate these surplus funds is less clear.

“The government currently estimates that the UK’s DB schemes are in a £160bn surplus, stoking the debate on who should benefit the most: scheme sponsors, members, or insurers through buyout.”

Meanwhile, Broadstone senior actuarial director, Jaime Norman, described how the "relatively calm" market conditions had left the aggregate DB funding position largely unchanged.

"The implementation of the Pension Schemes Act continues to progress," he continued, "which expands the endgame opportunities available to schemes, and we’d expect a busy half year in the pensions de-risking market too, given elevated funding levels.”

Norman warned, however, that trustees would need to remain alert to geopolitical and domestic political uncertainty.

“They will be closely watching inflation expectations and market volatility to ensure their investment strategy remains appropriate for their chosen long-term objectives,” he added.

Standard Life PRT transaction manager, Lauren Doherty, also highlighted the resilience of aggregate DB funding levels, noting that the surplus had remained broadly stable since the beginning of the year.

“This continued stability reflects the strong funding position many schemes have built up in recent years, providing trustees with greater flexibility as they consider their long-term objectives.”

“Strong funding positions have expanded the range of options available, but many schemes remain focused on maintaining resilience and ensuring that today’s surplus can withstand tomorrow’s challenges,” she concluded.

This article was first published on our sister title, Pensions Age.

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