The financial position of DB pensions continues to improve, with the PPF index showing scheme surpluses rose by £22.1bn over the past year.
The surplus for the 4,838 schemes in this index increased by £2.7bn through November, meaning these schemes now have a surplus of £257.6bn. This index reflects the funding position of the universe of DB schemes that would be eligible for support from the Pension Protection Fund.
The PPF also updated the index to reflect the latest data which resulted in an increase in the funding ratio of 0.3 percentage points from 124.7 per cent to 125 per cent, as at 31 March 2025.
However these figures do not take into consideration the proposed introduction of pre-97 increases for PPF compensation which was announced at the Budget — which may increase liabilities on these schemes.
Broadstone actuarial director Sarah Elwine says: “The PPF updates its methodology each December which this year has resulted in a small boost to the funding ratio, reflecting a healthier than previously anticipated picture of defined benefit scheme funding.
“However, it has yet to account for the Government’s announced changes to pre-1997 indexation in the Budget which it estimates could increase section 179 liabilities by just under 12 per cent.”
Elwine adds that this change though is unlikely to impact funding or route to buyout for most schemes. She adds: “Looking forward to 2026, pension schemes remain extremely well-funded by historical comparisons and trustees will be in a strong position to consider their route to endgame.
“The de-risking market looks set for a highly active 2026 with an increasing number of options available to schemes to achieve their long-term strategic objectives.”
Standard Life business development manager adds: “Defined benefit pension funding levels continue to demonstrate financial strength as we approach year-end.
“This resilience is reinforced in the latest Purple Book update, which reports improvements in aggregate S179 funding levels and narrowing of buy-out deficits over the year to 31 March 2025.
“These robust funding positions mean schemes are well-placed to lock in de-risking opportunities and take advantage of favourable market conditions. By doing so, they can efficiently transfer both investment and longevity risk, while providing trustees with the certainty that members’ benefits are fully protected.”
