The aggregate surplus of FTSE 350 companies’ defined benefit (DB) pension schemes fell by £20bn in June amid a fall in bond yields and an increase in market inflation expectations, Mercer’s latest Pensions Risk Survey data has revealed.

According to the analysis, the combined surplus of FTSE 350 DB schemes' fell from the record high £69bn recorded at the end of May 2023 to £49bn at the end of June 2023.

Despite the fall, Mercer's tracker revealed that the vast majority of schemes are in a much better funding position than they may have expected to be just 12 months ago.

However, Mercer highlighted the fall as demonstration that uncertainty and risks are still present, despite many schemes being well-funded, not just on an accounting basis but also against their long-term funding targets or even against the cost of buyout.

Given this, Mercer UK funding consulting leader, Leanne Johnston, suggested that trustees and employers may want to consider taking action to protect their position and to help with achieving their long-term goals.

She stated: “There is a range of end game options trustees and employers may consider.

"For some, buyout is appropriate whereas for others, it may be that a more flexible approach is preferable.

“It is important that any option is considered with a scheme’s long-term goals in mind.”

Mercer’s Pensions Risk Survey data relates to approximately 50 per cent of all UK pension scheme liabilities, with analysis focused on pension deficits calculated using the approach companies have to adopt for their corporate accounts.

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