Rising gilt yields push PPF 7800 index aggregate surplus up 23%

The PPF 7800 index, which measures the funding levels of 5,215 DB schemes, registered an aggregate surplus increase from £254.3bn at the end of July to £313.8bn at the close of August.

“Scheme funding continues to improve, driven by rising gilt yields and falls in liability values. This is tempered by a corresponding fall in bond values and ongoing volatility in global equity markets,” said Broadstone senior actuarial director Jaime Norman.

The overall funding ratio lifted from 118.2 per cent to 125.1 per cent. There were 1,134 schemes in deficit and 4,081 schemes in surplus. 

The aggregate deficit of those schemes with deficits more than halved over the period, from £29.8bn at the end of July to £14.3bn.

“We’ve not seen an increase in bond yields like this since January 2009,” said PPF chief finance officer Lisa McCrory.

“The overall increase since November 2021 has more than doubled the largest previous increase in yields since the Bank of England gained independence in 1998.”

Buck’s head of retirement consulting, Vishal Makkar, observed that spiralling inflation and rising interest rates still represented causes for concern for trustees. A global survey of pension fund managers conducted by Ortec Finance, meanwhile, revealed that 73 per cent of managers believe the UK and the eurozone will be in recession within the next 12 months.

“As they look to shelter investments from the uncertain economic climate, trustees and sponsors look to inflation-proof assets to safeguard their pension schemes and, ultimately, members’ pensions from increased volatility,” Makkar said.  

“As the newly appointed government indicates that it is likely to announce wider budget plans in the coming weeks, trustees and sponsors may be forced to reassess their position and consider necessary measures to ensure schemes are ready for a bumpy winter.”