The aggregate surplus of the UK’s defined benefit (DB) pension schemes remained "stable" in June, despite uncertainty around the general election, rising from £179bn to £187bn, analysis from XPS Pensions Group has revealed.

Based on liabilities of £1,276bn and assets of £1,463bn, the tracker showed that the aggregate funding level of UK pension schemes on a long-term target basis remained “extremely positive”, as of 26 June 2024, at 115 per cent of the long-term value of liabilities.

This is despite a UK pension schemes’ funding positions falling by around £1bn relative to long-term funding targets over the course of the month, as the index rose £188bn in early June before falling down to £187bn by the end of the month.

Aggregate scheme assets also increased slightly over June 2024, as equity markets continued their strong year to date, although this was slightly offset by a small decline in long-term gilt yields of around 0.1 per cent, which led to an increase in the value of liabilities.

Commenting on the findings, XPS Pensions Group senior consultant, Henry Shore, said: “Despite the uncertainty typically associated with the run up to general elections, surpluses have remained stable through June, and are at near-record levels since the start of the year."

XPS noted that following the outcome of today’s (4 July) general election, attention will soon focus on the future government’s timelines for getting the draft DB Funding Code passed through parliament, as well as other topical issues such as options on the uses of DB scheme surpluses.

“Trustees and sponsors should remain optimistic and develop strategies to best manage their strong surpluses, with insurance transactions and running on for surplus now viable options for many,” said Shore.

“For those running on their schemes, the release of the new DB funding code will provide clearer guidance on the options available.

“Trustees and sponsors will therefore be hoping that the forthcoming parliament will implement the funding code in alignment with the new Funding and Investment Strategy regulations commencing in September 2024, to minimise any potential uncertainties.”

---