July 2023 proved “reassuringly uneventful” for defined benefit (DB) scheme’s funding positions, according to PwC’s Buyout Index.

The index showed the UK’s DB schemes had sufficient assets to buyout their pension promises, with a surplus of £210bn recorded in July.

PwC’s July index provided comforting reading following an “action-packed” month of pensions initiatives and announcements, showing the majority of DB schemes in a strong position to meet their liabilities.

PwC’s Low Reliance Index showed a surplus of £350bn (assuming low-risk strategies, income-generating assets, such as bonds), making schemes unlikely to require further funding from the sponsor.

“July was an action-packed month for pensions initiatives, with a number of consultations, consultation outcomes, plans and calls for evidence launched following the Chancellor's Mansion House speech,” said PwC head of pension funding and transformation, John Dunn.

“In contrast, the funding position of the UK’s DB schemes has been reassuringly uneventful; DB schemes remain well-funded as has been the case for many months now.”

Among those consultation outcomes was the Department for Work and Pensions’ (DWP) response to its 2018 consultation on the consolidation of DB schemes, which reiterated enthusiasm for a shift towards the use of superfunds to reduce risk for DB schemes.

The government defines a superfund as a “consolidator body which replaces sponsoring employers with additional assets held in reserve (a capital buffer).”

In its response to the 2018 consultation, the Department for Work and Pensions (DWP) said superfunds had the potential to replace and “uncertain covenant” with a “known and accessible capital buffer provided by investors”.

Commenting on the response, Dunn said that while PwC agreed vehicles such as superfunds could provide a viable alternative to insurance for those funds finding buyout unaffordable, but added: “Whether or not superfunds will support the government’s vision, to harness the substantial assets of UK pension schemes to stimulate economic growth by investing in productive assets, will depend on the risk appetite of both investors and regulators.”

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