UK DB scheme surplus increases £41bn in May

According to figures published on Tuesday by the pensions lifeboat, DB schemes’ surplus reached £94.6bn at the end of May, which compares with £53.7bn at the end of April.

The position has improved from a year ago, when a deficit of £132.3bn was recorded at the end of May 2020.

The latest figures provide the estimated funding position, on a section 179 basis, for DB pension schemes potentially eligible for entry to the PPF.

The funding ratio increased from 103.1 per cent at the end of April to 105.6 per cent 

The PPF 7800 index calculations have been updated to include the changes made to PPF’s actuarial assumptions. This had an impact in the increase of the funding ratio of 2.8 percentage points.

Total assets amounted to £1.79tn at the end of May, while total liabilities stood at £1.7tn. There were 2,449 schemes in deficit and 2,869 schemes in surplus.

Lisa McCrory, PPF’s chief finance officer and chief actuary, said: “As we anticipated, the funding position of our 7800 Index improved in May, with the aggregate surplus of the 5,318 schemes increasing by just over £40bn to £95bn.

“While market conditions were relatively stable, the change was caused by the move to the new A10 s179 assumptions, which resulted in the funding ratio rising by nearly 3 per cent to nearly 106 per cent.

“So far this year we’ve seen an improved position for UK DB schemes – however, we remain alert to the continuously changing environment around us.”

Vishal Makkar, head of retirement consulting at Buck in the UK, noted that the positive results reflected “the optimism of the financial markets”.

He added: “The markets have responded positively as the UK continues to ease lockdown restrictions in line with the government’s Covid roadmap, and the country’s immediate economic future remains closely tied to the success of the vaccine rollout.

“There is, however, still clear evidence to suggest that the financial impact of the pandemic is far from over. Indeed, the emergence of new virus variants and the potential threat of future waves may yet necessitate a return to stricter lockdown measures.

“While there may then be cause for cautious optimism, it’s important to remember that UK pension schemes, sponsors and members are yet to fully feel the long-term impact of the pandemic or the effects of Brexit.”