DB schemes reach 120% funding

This meant that the surplus rose to £267.9bn at the end of last month from £261.6bn in May.

Section 179 liabilities, the level of assets needed to secure PPF-level benefits with an insurer, were 120.1 per cent funded in June, up from 118.9 per cent in the previous month.

By the end of June, total assets in DB schemes stood at £1.6tn, while total liabilities were £1.3tn. There were 1,398 schemes in deficit and 3,817 schemes in surplus, the PPF stated.

The aggregate shortfall of the schemes in deficit at the end of June was £25.3bn, down from £28.2bn in the previous month.

Lisa McCrory, chief finance officer and chief actuary at the PPF, said: “Rising bond yields offset by decreases in equities saw the funding position for the 5,215 schemes under our protection marginally improve last month.

“While this ongoing trend in improved scheme funding is positive, we’re mindful that the improvement is largely the impact of the current market environment.

“Trustees should continue to monitor market movements to understand how they can take advantage and mitigate future risks on scheme funding,” she added.

Buck’s head of retirement consulting, Vishal Makkar, agreed that the improvement in funding levels was due to higher gilt yields.

He said: “The Monetary Policy Committee voted to raise the base rate to 1.25 per cent in mid-June and, alongside rising longer-term gilt yields, this may continue to prove beneficial for some schemes’ funding positions.

“However, this should be treated with caution as continued inflation and turmoil at the top of the government will impact a range of scheme sponsors, while also upending the investment landscape.”

Makkar added that due to an expected increase in inflation and the cost of living crisis, “both scheme sponsors and trustees need to keep a close eye on the shifting and uncertain economic climate, and evaluate how well their current investment strategy addresses these risk dynamics in an efficient way”.