The aggregate surplus of defined benefit (DB) pension schemes increased from £442.3bn at the end of February 2024 to £455.5bn at the end of March 2024, according to the Pension Protection Fund (PPF) 7800 Index.

Based on total assets of £1,434.3bn and total liabilities of £978.8bn, the index showed that the funding ratio for the 5,050 DB schemes in the index rose from 146.1 per cent at the end of February 2024 to 146.5 per cent.

This also marks a year-on-year improvement, with a surplus of £358.9bn and funding ratio of 134.3 per cent previously recorded at the end of March 2023.

The number of schemes in deficit has also fallen, as the index revealed that there were 497 schemes in deficit in March, down from 529 in February, and 4,553 schemes in surplus.

In line with this shift, there was a fall in the deficit of the schemes in deficit, dropping from £3.9m at the end of February to £3.4bn at the end of March 2024.

BlackRock head of UK fiduciary business, Sion Cole, highlighted the latest £10bn increase in the aggregate surplus as a “bellwether” for the positive funding environment, pointing out that many DB benefit pension schemes have continued to shore up their positions and benefit from higher gilt yields.

“The BoE is in no rush to cut rates but has indicated that things are moving in the right direction for future cuts, similarly we expect the Fed to begin rate cuts in the second half of the year,” Cole continued.

“Investors have generally embraced a more positive macroeconomic outlook, however, in the short-term, we believe that this higher cost of capital will continue to shape markets and many scheme’s allocation strategies.”

And, given the continued funding improvements, Broadstone actuarial director, Sarah Elwine, said it is "positive" to see an increasing number of end game options for pension schemes, noting that many are now looking to their future choices during a period of comparative stability.

She continued: "We have seen the first two superfund deals, new entrants in the market with rumours of more to come, as well as a consultation around establishing a new PPF consolidator.

“Scheme managers and trustees can also now explore the potential for running on as a viable alternative to buy-out by reaching low dependence on the employer’s support, especially as the regulator explores the ability of freeing up surpluses.

"The dramatic improvement in the funding environment over the last few years has given schemes a chance to knock on new doors, and so trustees should be proactive and well-advised in their decision-making process.”

Adding to this, Standard Life business development actuary, Charlotte Fletcher, emphasised the importance of scheme preparation, pointing out that the pension scheme buy-in and buyout market continues to be “extremely busy”, with volumes reaching nearly £50bn in 2023.

She continued: “For trustees looking to secure their scheme members’ benefits, it is important to carefully plan their approach.

"Managing any illiquid assets, for example, is highlighted as a key consideration for schemes in our new research report, with two-thirds of employee benefit consultants confirming illiquids have delayed a BPA transaction.

“Thorough preparation, engaging with insurers early in the process, and having high quality data, also continue to be of paramount importance.

“Looking ahead, the regulatory picture continues to evolve with the Department for Work and Pensions’ DB Funding and Investment Strategy and Amendment regulations coming into force from 6 April.

"However, with these latest figures highlighting how funding levels have remained strong and steady in 2024, we expect the de-risking market to maintain strong activity as schemes look to secure members’ benefits and lock in funding gains.”

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