Volatile markets and elevated bond yields have hit the funding of DB schemes according to the latest figures from the Pension Protection Fund.
The aggregate surplus on 4,833 schemes in its PPF 7800 Index reduced by £5.3bn in April 2026, to stand at £358.5bn.
Bond yields have been hit by ongoing turbulent markets, fuelled by geopolitical uncertainty with the US Iran conflict over the last month. Bond markets in the UK have been further destabilised by political uncertainty following last week’s local election and speculation about the Prime Minsters future.
But despite these ongoing issues, DB surpluses remain significantly higher than a year ago, when they stood at £205.2bn
Figures from the PPF show that the funding ratio saw a slight reduction of 0.2 percentage points to 131.2 per cent and the number of schemes in surplus reduced by 25 to 3,790, falling to 78.3 per cent of all schemes in the universe.
Broadstone actuarial director Sarah Elaine says: “Pension scheme funding dropped back in April as continued market volatility and inflation expectations support elevated bond yields.
“With the conflict in Iran seeming unlikely to end imminently and domestic political uncertainty lingering in the UK, trustees must once more deal with a challenging macro environment.
“This could impact pension schemes that do not have a matched strategy in place, and so trustees and scheme managers should continue to monitor their investment strategy to protect their long-term objectives and support their members.”
She adds: “However, pension scheme funding remains in a healthy position with the aggregate surplus significantly higher compared to last year. Alongside the passing of the Pension Schemes Act, it highlights the fact that many trustees still have optionality and the insurance market continues to quote for new business for schemes looking to secure their members’ benefits.”
Trustees are being warned to factor in the potential impact on markets of a leadership challenge.
IG chief market analyst UK Chris Beauchamp says: “There is no clear plan for what comes next, but markets are already pricing in a new PM who will open the floodgates on spending despite the UK’s dangerous fiscal situation.
“Faced with hordes of Labour MPs worried about their re-election chances as Reform surges, a new PM will find it very hard to resist calls to spend more money in order to shore up their embattled party. Much of the case for the UK as an investment destination rested on the Starmer/Reeves commitment to fiscal rectitude, but it is unlikely that a new leader from the left of the party would feel bound by such promises.”
Hargreaves Lansdown investment strategy director Anna Macdonald adds: “The UK’s bond markets are weaker today across the curve, on continued political uncertainty which is compounded by President Trump’s comments on a deal with Iran, where he described the ceasefire as on ‘life support’.
“Elevated oil prices add inflationary pressure to a bond market already frazzled by concerns that a different UK Prime Minister might take a different view on borrowing, relaxing fiscal rules or extending them, and may introduce more legislation that the market would view as potentially damaging to economic growth.”