UK defined benefit (DB) pension schemes recorded a record aggregate surplus of £223bn at the end of August, according to analysis from XPS Group.

The latest figures mark an £11bn increase from July’s total and a £50bn rise compared to the same point last year.

According to XPS, the improvement was driven by a sharp increase in gilt yields during August, which reduced liabilities more quickly than asset values.

By the end of August, schemes held £1,151bn in assets against £928bn of liabilities, giving an overall funding level of 124 per cent. That compared with 122 per cent a month earlier and 116 per cent in August 2024.

XPS Group senior consultant, Jill Fletcher, said: “Funding levels of defined benefit schemes strengthened over August 2025, as schemes that are not fully hedged against interest rate changes benefitted from the significant rise in gilt yields. This led to liabilities reducing in value by more than scheme assets,

“This comes at a critical time, as we approach the first anniversary of the funding and investment strategy regulations applying to scheme funding valuations.

"Many DB schemes approaching their first valuation under these regulations will already be fully funded on, or above, a long-term funding basis.”

The latest results build on July’s strong position, when surpluses rose to £211bn despite concerns that mortality trends could temper future gains.

While XPS Group had warned that incorporating updated mortality data could increase liabilities by around 1 per cent, August’s rise in gilt yields helped schemes achieve further headroom against long-term targets.

With surpluses continuing to grow, Fletcher said the question of how to use them is becoming more pressing, noting that many schemes will still target buy-ins or buyouts.

However, XPS Group said that it expects more trustees and sponsors to consider running on and making use of new surplus flexibilities.

“Many schemes will continue to aim to insure benefits through buy-in or buyout but will still need to make decisions on how the surplus should be used," Fletcher stated.

"The potential to run on a scheme and make use of recently announced surplus flexibilities is likely to be actively considered by more schemes as we continue to see surplus growth.”

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