The aggregate surplus of 5,050 defined benefit schemes in the PPF 7800 Index increased through December 2023, rising from a surplus of £425.5 billion at the end of November 2023 to £428.2 billion.
This means that the aggregate funding position has increased by £51.5 billion throughout 2023.
Broadstone senior actuarial director Jaime Norman says: “The PPF 7800 registered a small improvement in its aggregate surplus through December but the wider picture of vastly improved funding through the Defined Benefit scheme universe is clear.
“Rapidly rising gilt yields over the past two years have driven an aggregate surplus of over £400 billion at the end of 2023 combined to the deficit that was regularly recorded before 2021. It means for many schemes buy-out is now more affordable and achievable which has led to an intensely competitive de-risking market.
“Given congestion is likely to continue into 2024 and beyond, schemes within touching distance of buy-out should be focusing on their data to ensure they are in the best possible position to attract the attention of insurers. With rates now starting to fall, insurers will be laser-focused on choosing the most commercially attractive schemes to take on and preparation will be paramount.”
Standard Life business development actuary Charlotte Fletcher says: “Funding positions for UK defined benefit pension schemes fell slightly in the last month of 2023, following falls in long-term gilts during December. The aggregate section 179 funding ratio for the 5,050 schemes in the PPF 7800 Index now stands at 142.8 per cent at the end of December 2023, compared to 145.7 per cent at the end of November 2023.
“Despite the slight fall in gilt yields over the last month, DB funding levels continuously improved throughout 2023 with the section 179 funding ratio rising significantly over the year from 136.5% in December 2022. This is resulting in trustees and sponsors focusing on their DB de-risking and endgame strategies.
“Looking ahead to this year, many schemes are likely to take the opportunity to review their positions, looking to lock down risk and benefit from any gains over the last year. This will provide a strong foundation for the bulk annuity market in 2024, as activity levels are showing no signs of slowing down.”
