UK defined benefit (DB) pension schemes’ funding positions remained at record levels in November, according to an analysis by XPS.

XPS Pensions said DB schemes’ funding positions were positive relative to long-term funding targets.

With assets totalling £1,467bn and liabilities of £1,256bn, the aggregate funding level of UK DB pension schemes on a long-term target basis remained at a record level of 117 per cent of the long-term value of liabilities, as of November 28.

A fall in long-term gilt yields of ~0.1 per cent led to an increase in the value of liabilities, reducing scheme funding levels.

However, this increase was offset by positive asset returns from equities and bonds in November, leaving scheme funding levels broadly unchanged overall and remaining at record levels, XPS said.

UK DB pension scheme surpluses first reached record levels in October, with an aggregate surplus of over £208b.

Since then, the Chancellor of the Exchequer, Rachel Reeves, delivered her first Mansion House speech on November 14.

According to XPS, the speech signalled a promising outlook for the UK’s financial services sector and a positive trajectory for public investment, aligning with the position of DB pension schemes.

November also saw the release of inflation data for the year to October 2024, with CPI inflation higher than expected, and above the Bank of England’s 2 per cent target.

XPS Group senior consultant, Jill Fletcher, commented on the findings: “Gilt yields have stabilised following an increase during October, and immediately following the Budget, and funding levels have remained strong and relatively stable over November.

“Following The Pensions Regulator’s new DB funding code coming into force in November 2024, schemes with a valuation date at the end of December are approaching their first valuation under the new DB funding regulations.

"Trustees and sponsors will therefore need to work together to evaluate their long-term strategy and determine whether insurance is the right route for them, or whether schemes can be run-on to generate additional surplus for the benefit of both members and sponsors.”

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