The aggregate surplus of defined benefit (DB) pension schemes rose to £239bn in January 2025, as DB scheme funding continued to strengthen, the Pension Protection Fund's (PPF) 7800 Index has revealed.

The estimated aggregate surplus rose by almost £13bn over the month, despite "significant" intra-month volatility, pushing the average funding ratio up from 125.7 per cent to 127 per cent.

In total, scheme assets rose by 1.8 per cent to £1,125.1bn, while total scheme liabilities rose by 0.8 per cent, to £886.1bn.

There were also improvements for those schemes in deficit, as the PPF revealed that the deficit of schemes in deficit had fallen by £1.5bn to £24.1bn.

Commenting on the findings, PPF chief actuary, Shalin Bhagwan, said: “This month’s PPF 7800 Index indicates that aggregate DB scheme funding strengthened in January.

"The estimated aggregate surplus rose by almost £13bn to £239bn, further illustrating the continued strength and resilience of DB scheme funding.

"There was significant intra-month volatility in gilts, as markets tried to weigh up the impact of tariffs on growth and inflation, although yields settled a few basis points lower than at the end of December.

"This, coupled with strong growth in UK and global equities, drove higher increases in both equity and bond asset values relative to the increase in liabilities, with the net result being improved overall funding.”

This was echoed by Broadstone actuarial director, Sarah Elwine, who said: “The first PPF 7800 update for 2025 finds funding improvements in January despite a turbulent start to the year.

“The month was characterised by the return of volatility with significant swings in the gilt markets while the potential for a global trade war is driving continued macroeconomic uncertainty."

Given this, Elwine warned that trustees and scheme managers will need to be aware of how this uncertainty, alongside the possibility of a return to inflation and a rocky economic outlook, could impact funding levels.

“Hedging strategies could be considered to lock in positive positions while there are regulatory issues to consider in 2025 given the mooted access to surpluses and the new DB Funding Code for schemes embarking on valuations," she added.

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