UK defined benefit (DB) pension scheme surpluses reached record levels in October, with an aggregate surplus of over £208bn, XPS Group analysis has revealed.

The figure rose "significantly" from £187bn in September 2024.

With assets totalling £1,452bn and liabilities of £1,243bn, the aggregate funding level of UK pension schemes on a long-term target basis also hit a record level in October, at 117 per cent of the long-term value of liabilities.

According to XPS, the increase in surplus was “mainly driven by rising gilt yields”.

Following the government’s Autumn Budget, gilt yields rose, driven by expectations of higher future government borrowing.

A rise in long-term gilt yields of around 0.3 per cent reduced liability values and improved scheme funding levels.

However, XPS said these improvements were partially offset by a decline in aggregate scheme assets over the month, driven by schemes’ hedging strategies and negative returns on bonds and UK equities.

XPS Group senior consultant, Jill Fletcher, also highlighted the latest figures as a reminder that funding positions can “change quickly.”

“Increases in gilt yields over October reflected expectations of higher government borrowing following the highly anticipated Budget," she explained.

“With strong surplus positions and the introduction of new DB funding regulations, many trustees and sponsors are evaluating their long-term strategies to determine whether insurance is the right route for them, or if the scheme can be used to generate additional surplus for the benefit of both members and sponsors alike.”

---