The aggregate surplus of defined benefit (DB) pension schemes rose to £442.3bn at the end of February 2024, up from £425.4bn at the end of January, the latest Pension Protection Fund (PPF) 7800 Index has revealed.

This was based on total assets of £1,400.8bn and total liabilities of £958.5bn, pushing the total funding ratio up from 143.9 per cent at the end of January 2024 to 146.1 per cent.

The number of schemes in deficit has also fallen, down from 599 in January to 529 schemes in February, while the remaining 4,521 schemes were in surplus.

In line with this, the deficit of the schemes in deficit at the end of February 2024 was £3.9bn, down from £4.3bn at the end of January 2024.

Commenting on the latest update, PPF chief actuary, Shalin Bhagwan, said: “Over the past month, we’ve seen positive movements across our estimates in the PPF 7800 index.

"In particular, there has been a continuation in the upward trend of the funding ratio, with a 2.2 per cent increase in February to 146.1 per cent.

“This change is the result of a £16.9bn increase in the aggregate surplus of eligible schemes in the DB universe, to £442.3bn. While the deficit of schemes in deficit fell by £0.4bn to £3.9bn.

“These movements resulted from both a decrease in the liabilities of schemes in the DB universe by 1.2 per cent and a net rise in the value of assets held of 0.4 per cent.

“Falling liabilities were a result of an increase in shorter-dated gilt yields as stronger inflation data meant that markets priced a later and shallower rate-cutting path for global central banks.

"On the asset side, decreases in the value of bond portfolios were offset by high returns on overseas equities.”

Adding to this, Broadstone senior actuarial director, Jaime Norman, said: “The PPF 7800 recorded an encouraging upswing through February demonstrating the continued strength of scheme funding at the current time.

“We have seen the strength of the de-risking market in 2023 through the financial results reported by insurers last week. Insurers are also re-iterating their positive outlook for the sector amid strong scheme demand for risk transfers solutions.

“The endgame options available to employers are also now expected to expand with the government set to make it easier to extract surpluses and the PPF lining itself up as a public sector consolidator.

"Whilst many schemes will already have an end-game strategy locked in, for those that don’t, employers should be sitting down with trustees to agree what the future of their scheme should look like.

“Whatever path is taken, schemes still need to have best-in-class administration, excellent data and meticulous preparation to give them the best chance of achieving their goal.”

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