The conflict in Iran hit financial assets in March, but private sector defined benefit (DB) schemes improved their overall funding position over the course of the first quarter of 2026, according to new data from the Pension Protection Fund (PPF).
The PPF’s 7800 Index recorded an aggregate funding ratio of 131.4% at the end of March, equivalent to a surplus of £263.8bn across the 4,838 schemes it covers.
The surplus was down by almost £10bn since the end of February, but gilt yield increases drove down liabilities to help increase the overall funding ratio. Liabilities fell from £887.6bn to £841.2bn during March.
Since the start of the year, assets and liabilities have fallen slightly, while the funding ratio has risen.
Shalin Bhagwan, the PPF’s chief actuary, said: “Global markets were highly volatile through March as the escalation of the US-Israel-Iran conflict triggered a global energy supply shock. Although equities stabilised towards the end of the month following indications of possible ceasefire talks, markets still ended March lower overall.
“At the same time, higher oil and gas prices pushed up inflation expectations, driving gilt yields higher and flipping market pricing for the UK from expecting rate cuts in 2026 to rate hikes.”
The higher funding ratio reflected the “resilience of DB funding”, Bhagwan added, as well as “the extent to which higher discount rates can offset market stress”.
Claire Altman, managing director for pensions risk transfer and individual retirement at Standard Life, highlighted the “beneficial strategies put in place by many schemes” since the gilts market crisis of 2022.
“While there have been reports that a small number of schemes have experienced cash calls on their liability-driven investment positions as gilt markets have moved, this is not unexpected given how hedging programmes operate in periods of volatility,” Altman added.
She continued: “It’s important to remember that we are now operating in a world of more persistent inflation, higher interest rates and greater geopolitical risk, which inevitably puts pressure on investment strategies. While higher long‑term interest rates can support funding by reducing the value of liabilities relative to the assets, the benefit depends on how well schemes are hedged.”
Jaime Norman, a senior actuarial director at Broadstone, warned that “a new wave of inflationary pressure is likely to hit the market”, which could negatively affect schemes without appropriate hedging strategies.
“Trustees and scheme managers should continue to monitor their investment strategy to protect their long-term objectives and support their members,” Norman said.
