The aggregate funding level of UK defined benefit (DB) pension schemes increased to 105 per cent in February 2023, according to XPS Pensions Group's DB:UK Tracker.

The tracker showed that UK pension schemes' funding positions rose by around £30bn against long-term funding targets in February, based on assets of £1,447bn and liabilities of £1,377bn.

The group attributed the improvement to a fall in the value of liabilities, after February saw a rise in gilt yields of 0.39 per cent, to the highest levels seen since October’s market turmoil.

XPS Pensions also pointed out that the FTSE 100 hit a record high of over 8,000 points towards the middle of the month amid positive company earnings, a weakening pound and hope that both inflation and interest rates may be nearing their peak.

Given this environment and strengthened funding levels, the group suggested that schemes can begin to focus more attention on their long-term investment strategies.

“It’s been an encouraging start to the year for UK pension schemes which have benefited from the positive performance of global equity markets and rising gilt yields leading to an increase in funding levels," XPS Pensions Group senior investment consultant, Felix Currell, stated.

“Despite the hope that central banks may be coming to the end of a period of aggressive rate hikes, there remains risks to the outlook of the global economy. Trustees will be hoping that if yields do continue to rise that growth markets do not splutter.”

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