The aggregate defined benefit (DB) pension surplus decreased for the first time since July last month, falling from £108.8bn to £103.2bn, the Pension Protection Fund (PPF) 7800 Index has revealed.

The funding ratio decreased from 106.4 per cent at the end of September to 105.9 per cent at the end of October.

A fall in bond yields was the primary driver behind the “marginal decline” in the surplus.

Assets values increased by £43.1bn to £1,844bn over the month, although this was more than offset by liabilities also rising, by £48.7bn to £1,740.8bn.

The number of schemes in deficit increased from 2,383 to 2,402 in October, with the aggregate deficit of these schemes up from £109.4bn to £118.2bn.

“This month, we’ve seen the aggregate surplus for the 5,318 schemes we protect decline for the first time since July to £103.2bn,” commented PPF chief finance officer and chief actuary, Lisa McCrory.

“We’ve also seen the number of schemes in deficit increase from 2,383 to 2,402 and their aggregate deficit increase by £8.8bn to £118.2bn.

“While this marginal decline in the aggregate surplus is mainly due to a decrease in bond yields, it’s a reminder of the ongoing volatility in scheme funding levels and the risk the schemes we protect pose on our reserves and funding position.”

Buck in the UK head of retirement consulting, Vishal Makkar, added: “The aggregate funding positions of the schemes in the PPF Index remained solid over the course of October, meaning that UK defined benefit schemes look set to end this year in a strong position. The funding ratio at the end of last month fell only slightly to 105.9 per cent, well above the 91.2 per cent recorded at this point in 2020 and the 94.4 per cent seen in 2019.

“Trustees were given further breathing space by the autumn Budget, which provided little in the way of pensions policy announcements. Schemes should take advantage of this period of policy consistency and relative funding security to invest time and energy into other issues and more long-term projects.

“These include concerns around rising inflation, as well as a potential increase in the Bank of England’s base rate, which need to be factored into schemes’ contingency planning. In terms of governance and administration, COP26 has thrust the ESG obligations faced by schemes to the fore.

“Meanwhile, the requirements of the ongoing Pensions Dashboards Programme have posed new challenges to the way schemes administer their member data. Clearly, there is still plenty of work on the shoulders of scheme trustees and many major challenges to be tackled.”

Share Story: