The aggregate surplus of defined benefit (DB) pension schemes rose to £425.5bn at the end of November 2023, up from £418.8bn at the end of October, the latest Pension Protection Fund (PPF) 7800 Index has revealed.

The tracker showed that total assets had increased from £1,312.9bn in October to £1,356.4bn, partially offset by an increase in total liabilities, which rose from £894.1bn in October to £930.9bn in November.

The number of schemes in deficit has also fallen, as the PPF’s analysis showed that there were 595 schemes in deficit, down from 619 in October, and 4,455 schemes in surplus, down from 4,431 in October.

In line with this, there was also a decrease in the deficit for schemes in deficit, falling from £4.5bn in October to £4.1bn in November.

The latest update also reflected an update to reflect the PPF's Purple Book dataset, as the lifeboat revised the funding positions from March 2023 to October 2023 to reflect this new data.

PPF chief actuary, Shalin Bhagwan, explained that this work helps to ensure that the PPF holds a "more up-to-date picture of the schemes we protect and enables us to understand the risks we face".

Bhagwan continued: "As a result of moving to the new dataset, which goes into greater detail about the asset mix of schemes in the universe, we have seen an increase of 1.1 percentage points in the funding level and an increase in the total deficit of schemes in deficit from £5.7bn to £8.2bn at 31 March 2023.

"The headline changes we’ve seen over the last month are the estimated aggregate surplus of schemes increasing by £6.7bn to £425.5bn and the funding ratio decreasing from 146.8 per cent at the end of October 2023 to 145.7 per cent.

"This is the result of more recent softer inflation data causing markets to price in an earlier start to policy rate cuts by global central banks, which led to a reduction in gilt yields and, consequently, a rise in liabilities by 4.1 per cent, which was offset by a rise of 3.3 per cent in total scheme assets.”

The recent DB funding improvements prompted record demand in the pension risk transfer market, with continued demand expected in the new year, as Standard Life senior business development manager, Rhian Littlewood, said that there are "no signs that activity levels will be slowing down, with enquiries picking up pace for 2024 transactions as schemes look to put themselves on providers’ radars".

However, Broadstone senior actuarial director, Jaime Norman, warned that there is continued volatility in markets, which is expected to continue into 2024 amid speculation over interest rates which could see schemes with hedging strategies begin to reap benefits.

Norman also warned that the de-risking market remains "extremely busy" with insurers able to pick and choose the most commercially attractive schemes to take on.

"For those schemes that are less attractive, the first superfund deal offers hope alongside the government’s consultation on the PPF becoming a consolidator albeit this is still some way off a market reality," he continued.

“In the meantime, there is increased debate on the merits on running schemes on indefinitely and how this can be achieved in a cost-effective manner.

"However this debate ends up, it will still be the most well run schemes – with good governance, a tight investment strategy and excellent data – that will be best placed to achieve their objectives, whether that be buyout, consolidation or to keep on trucking.”

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