The financial position of the UK’s DB schemes continued to improve this month, with schemes eligible for the Pension Protection Fund reporting an aggregate fund surplus of £261.6bn at the end of May.
This is an improvement on the £206.2bn recorded at the end of April – the first time this figure has passed the £200bn mark.
This update of the PPF 7800 index also showed that the funding ratio for these schemes also increased to 118.9 per cent in May — up from 114 per cent at the end of April 2022.
Total assets for these 5,215 schemes stood at £1,642.6bn and total liabilities were £1,381bn.
In total the PPF said there were 1,450 schemes in deficit and 3,765 in surplus. The aggregate deficit of the schemes in deficit at the end of May was £28.2bn, down from £47.8bn at the end of April.
Buck Consulting head of retirement Vishal Makkar says: “Funding levels for the schemes in this PPF Index increased again during May, driven by higher gilt yields.”
However he says that for some scheme sponsors the outlook may not be so positive. The ONS recently announced that GDP fell for the second month in a row in April, dropping by 0.3 per cent following a decrease of 0.1 per cent in March.
High inflation and the cost of living crisis could also continue to negatively impact industries like hospitality, which in many cases are still reeling from the effects of the pandemic. Meanwhile, high energy costs and ongoing supply chain disruption remain key challenges for other scheme sponsors, particularly in sectors such as manufacturing.
Makkar adds: “It’s not plain sailing for trustees either. On the regulatory front, further delays to the new DB Funding Code have just been announced. The new Code is now not due until September 2023, with the next consultation announced for autumn 2022. For a few schemes, this could be a welcome postponement, but for many the continuous delays and lack of certainty will just add to the challenges currently facing trustees.”