Private sector defined benefit (DB) pension schemes continued to experience a strong aggregate funding position over the course of the third quarter of 2026, according to new data.
The Pension Protection Fund’s (PPF) 7800 index of pension schemes reported that the total surplus across the 4,838 funds it covers reached £280.7bn at the end of September. This compares to £273.6bn at the end of August, and £264bn at the end of the second quarter.
Total assets have fallen during the period, but aggregate liabilities fell by more. As of 30 September, the 7800 index recorded combined assets of £1,082bn, against liabilities of £801bn, giving a funding ratio of 135%.
The PPF 7800 index reflects section 179 liability valuations, which is the cost of replicating PPF compensation through an insurance transaction. This means such valuations are typically lower than other measures such as buyout or low dependency.
Aaron Pang, the PPF’s acting chief actuary, pointed out that the 7800 index’s total liabilities were at the lowest level since 2007, which he said reflected the impact of higher gilt yields as well as “underlining the continued strength of DB scheme funding”.
Vishal Makkar, managing director for UK wealth consulting at Gallagher, said the next few months “could be pivotal” for schemes considering how to put their surpluses to use.
“The chancellor’s Budget later this month will help set the tone for the wider pensions and tax environment, while new rules expected next year should give well-funded schemes greater freedom to utilise surplus,” Makkar continued. “Together, these developments could influence how trustees and sponsors weigh up running on or proceeding with a buyout.”
Separately, consultancy Broadstone found that a volatile month for asset prices in September may have affected funding levels negatively, but this impact would have been softened with adequate hedging protections in place.
The firm’s Sirius index, which models two hypothetical DB schemes, found that its growth-focused model experienced a drop of 20 basis points in its funding level, while its “matching-focused” scheme’s funding dropped by 60 basis points.
However, the growth-focused scheme experienced more volatility during the month. Volatility was driven by inflation concerns and the Bank of England’s decision to pause gilt sales.
Christopher Rice, head of trustee services at Broadstone, said: “It is reassuring that in the light of this turmoil, both schemes have managed to suffer only minor falls in their funding positions thanks to the protections that most schemes have put in place.
“The funding dip in the middle of the month serves as a reminder to trustees and employers that funding risk remains, but managing their investment strategy well can help protect funding as far as possible.”
