More than six in 10 defined benefit schemes are now in surplus according to the latest data from The Pensions Regulator (TPR).
Its annual review of schemes valuations shows that this is a significant increase on the 27 per ent in surplus three years perviously, and the 47 per cent in surplus on a comparable basis last year.
These figures relate to a surplus on a technical provisions basis and relate to different tranches of schemes in each sample, depending the on dates of their scheme valuations.
Average funding levels rose sharply over this three-year cycle, from 89 per cent (in tranche 15) to 104 per cent (in tranche 18). Median recovery plan lengths fell from 5.3 to 3.8 years, reflecting stronger balance sheets, while average buyout funding levels increased from 68 per cent to 91 per cent according to TPR.
Broadstone’s chief actuary David Hamilton says these latest finding reinforced the ongoing funding improvements that have been seen in the DB sector for a number of years.
“This analysis formally evidences the step change improvement in funding seen by many DB schemes following the Truss mini-budget.
“More than two thirds of DB members should now have been in a scheme with a funding surplus at their last valuation with increasingly prudent approaches also being built in.
“We expect this level of security to continue to increase, which is fantastic news for members, although it may be hidden slightly in future analysis by changes to the new funding regime.”
Hamilton also noted that despite the improvements, around 250 schemes still extended their recovery plans. He says:“Even in a ‘good’ year, a significant number of schemes will face specific challenges. Continuing to understand risks, monitor developments and have contingency plans in place remain invaluable tools to trustees in managing their schemes.”