The aggregate surplus of UK defined benefit (DB) pension schemes increased by £42.8bn to £176.4bn in March, the Pension Protection Fund (PPF) 7800 Index has revealed.

As at 31 March, the funding ratio stood at 111.4 per cent, its highest level since June 2007, up from 108.4 per cent at the end of February.

The increase in funding levels was attributed to an increase in bond yields.

Total assets of the 5,215 schemes in the index decreased over the month, from £1,732.2bn to £1,721.5bn.

However, this was more than offset by liabilities falling from £1,598.6bn to £1,545.1bn over the same period.

There were 3,307 schemes in surplus and 1,908 in deficit at the end of March.

The aggregate deficit of the schemes in deficit was £62.9bn, down from £83.1bn at the end of February.

Commenting on the update, PPF chief finance officer and chief actuary, Lisa McCrory, said: “Last month the aggregated funding ratio for the universe of schemes we protect increased to 111.4 per cent, the highest it’s been since June 2007.

“Scheme funding levels continue to be impacted by the increase in bond yields which have moved to reflect expectations that the Bank of England’s policy rate will be higher in the coming years than it has for the previous decade.”

Buck UK head of retirement consulting, Vishal Makkar, added: “Funding levels for the schemes in the PPF Index improved over the course of March, as total liabilities fell sharply. With more than 3,300 of the 5,215 schemes in the PPF Index ending the month in a funding surplus, the thoughts of many trustees may turn towards other goals.

“The recent Spring Statement offered no major shake-up for pension schemes, with nothing new in terms of requirements or regulation for trustees to contend with. Unfortunately, the Chancellor also offered little in the way of relief when it comes to the ongoing cost of living crisis.

"The rising cost of living remains an important worry for scheme members and an increase in National Insurance contributions may well be a further pain point for those who haven’t yet reached retirement.

“Rising inflation could also impact most scheme sponsors and is likely to affect end game planning for many schemes this year. A combination of inflation and accompanying interest rate hikes could make 2022 a difficult year for DB schemes as they grapple with a rapidly shifting investment landscape. Trustees will need to plan carefully and may want to speak with a trusted adviser to help them navigate this new environment.”

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