Private sector defined benefit (DB) pension schemes were comfortably in surplus on an aggregate basis at the end of June, according to the Pension Protection Fund’s (PPF) 7800 Index.
The funding measure showed an aggregate surplus of £264bn as of 31 June, almost unchanged since the end of 2025 despite market volatility and fluctuations in government bond prices.
The surplus position equated to a funding ratio of 131.1% on a PPF funding basis, which reflects the cost of replicating PPF compensation with an insurance company. Low dependency and buyout funding levels are typically lower.
Despite the broadly positive position, the PPF’s data showed that the aggregate position of schemes in deficit on a PPF basis worsened over the course of June. This group of just over 1,000 pension funds had an aggregate shortfall of £21.8bn at the end of June, compared to £20.4bn a month earlier.
Aaron Pang, the PPF’s acting chief actuary, said this move reflected “the application of PPF drift to some schemes in that group over the month”.
“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.”
Attention turns to surplus use
With many DB schemes continuing to enjoy strong funding positions, industry commentators said it was important that trustees develop a clear idea of how to use their surplus – particularly in light of new flexibilities being developed following the passing of the Pension Schemes Act. The consultation on surplus release rules runs until 2 September.
Lauren Doherty, pension risk transfer transaction manager at Standard Life, said: “Looking ahead, trustees will continue weighing the balance between buyout, run-on and surplus use as greater regulatory clarity emerges. 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.”
Jaime Norman, senior actuarial director at Broadstone, added that the bulk annuity market was set for a busy second half of the year as schemes look to lock in their strong funding positions.
“Geopolitical uncertainty never seems to be too far away, and the entrance of a new prime minister in the UK as well as the resumption of conflict in Iran demonstrate how vigilant trustees must remain,” Norman continued. “They will be closely watching inflation expectations and market volatility to ensure their investment strategy remains appropriate for their chosen long-term objectives.”
Vishal Makkar, managing director for UK wealth consulting at Gallagher, said the plausible endgame options for schemes would vary depending on their circumstances.
“For smaller schemes or those with weaker sponsor covenants, buyout might be the most straightforward route,” he explained. “For larger schemes with strong governance and sponsor support, running on may be a viable option.
“When a scheme is approaching the end of its lifecycle, trustees need an evidence-led view of the scheme they actually run, and not the scheme they would like to have. In an evolving market, defining the buffer for a low-dependency funding level is rarely simple, requiring careful and sound judgement. It is up to trustees to weigh pressure from sponsors against their fiduciary duty to protect the interests of scheme members.”
