The funding position of DB schemes continued to improve in May — with the aggregate surplus of the 5,000-plus scheme in the PPF 7800 Index rising from £458.3 billion in April to £468.8 billion at the end of May.
Figures from these scheme show that the funding ratio also increased from 148.8 per cent at the end of April to 149.4 per cent. In total 476 schemes in this index remained in deficit but 4,574 schemes are now in surplus.
Commenting on these figures Broadstone’s actuarial director Sarah Elwine says: “The shock announcement of a General Election towards the end of May did little to alter the positive stability of defined benefit pension scheme funding.”
She says this follows two years of “drastic improvements” as interest rates have risen.
“This steadiness in the market should help drive long-term, cross-party policymaking that supports well-funded schemes as well as those where there is still work to be done.
“Whilst the election campaign has paused progress in creating a public consolidator, we hope that once the new government is formed, these plans can continue, providing additional end game options for smaller pension schemes.”
She adds that election can bring uncertainty but it is important for trustees and sponsors to prioritise the same long-term objectives. “This includes managing funding and investment risk to reduce volatility, ensuring good quality administration to keep members safe and happy, and appointing advisers that provide value for money.”
Standard Life business development actuary Charlotte Fletcher adds: “This latest PPF update shows funding levels for DB pension schemes remain robust, with many schemes in a position to look to de-risk with an insurer.
“However, with the European Central Bank cutting interest rates last week, pressure is mounting for the Bank of England to follow suit which may cause a period of fluctuation in scheme funding positions. The upcoming UK General Election is also adding to this degree of uncertainty as schemes look ahead to what the future might bring.
“The risk transfer market remains busy and is showing no signs of slowing, and with increased affordability, insurance remains the primary de-risking solution for many trustees and sponsors. Against this backdrop, diligent preparation, as well as early insurer engagement, remains vital in order to successfully navigating this busy market and ensure the best outcome for members’ benefits.”
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