The aggregate funding level of UK defined benefit (DB) pension schemes worsened slightly by 1 percentage point to 105 per cent in November, although most scheme remain in a "very healthy" position, according to XPS Pensions Group.

The XPS DB:UK funding tracker revealed that UK pension schemes’ funding positions have fallen by around £13bn over the month to 29 November 2022 against long-term funding targets, based on assets of £1,559bn and liabilities of £1,485bn.

This was amid a period of market calm, as the group noted that, following a period of significant volatility in the gilt market during September and October, yields stabilised as nominal gilt yields ended the month down 0.4 per cent, while long-term inflation expectations continued to fall.

However, according to the group, the fall in gilt yields and resulting increase in liabilities were slightly offset extent by long-term inflation expectations falling by 0.1 per cent over the month, in turn reducing pension scheme liabilities.

In addition to this, XPS pointed out that a strong performance by equity and corporate bond markets, particularly for UK markets, offset the impact of falling gilt yields further, meaning funding levels remained relatively stable over the period.

Commenting on the latest update, XPS Pensions Group actuary, stated: “Following the unprecedented market turmoil and collateral call issues we’ve seen over the previous two months, November was a much-needed period of relative calm for pension schemes.

"Many pension schemes remain in a very healthy position and should be exploring options to de-risk and lock in some of the gains made during 2022, including full or partial buy-ins.

"With the bulk annuity market getting busier and some insurers becoming more selective, it’s important for schemes to prepare well before any market approach.”

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