DB deficits fall £21.4bn in January

This meant the shortfall decreased to £65bn at the end of January, from £86.4bn in December.

Section 179 liabilities, the level of assets needed to secure PPF-level benefits with an insurer, were 96.5 per cent funded in January, up from 95.5 per cent in the previous month.

By the end of January, the total assets in DB schemes were worth £1.81tn, while total liabilities stood at £1.87tn. There were 3,149 schemes in deficit and 2,169 schemes in surplus, the PPF stated.

According to Lisa McCrory, chief finance officer and chief actuary at the PPF, the latest funding position is “slightly above pre-pandemic levels of 95.9 per cent in January last year”.

“A fall in bond and equity market indices over the month led to a decline in the value of assets and liabilities. However, overall we’re seeing an improved position for UK DB schemes to start the year.”

Vishal Makkar, head of retirement consulting at Buck, noted that the marked decrease in the aggregate deficit during January occurred “even as markets continued to feel the effects of the pandemic and a prolonged winter lockdown in the UK”.

“January also saw political turmoil in the US around the inauguration of President Biden and disruption to equity markets as the dramatic rise and fall of GameStop stock created further volatility.”

Nevertheless, the ongoing economic effects of the pandemic “present a greater challenge for DB schemes as businesses suffer, potentially endangering employer covenants”, Makkar said.

He added: “There does, however, appear to be light at the end of the tunnel. The UK’s successful vaccine rollout continues at pace and more than 18 per cent of the UK population has received at least one dose so far.

“This is particularly encouraging news for some of the UK’s hardest-hit sectors, such as hospitality. If this early vaccine success can be maintained and the economic challenges surrounding Brexit can be navigated, then there are reasons to be cautiously optimistic for 2021.”