Jaime Norman, Senior Actuarial Director at leading independent consultancy Broadstone commented: “The small declines in the aggregate surplus and funding ratio must be seen in the context of huge improvements to funding over the past two years.
Pension schemes are in a significantly stronger position now which has led to the intensely competitive de-risking market as schemes look to capitalise by securing the benefits of their members via a buy-out. Insurers are scaling capacity to meet demand but schemes need to ensure they are putting themselves in the strongest possible position to attract and engage the attention of insurers.
“Excellent preparation and data quality as well as best-in-class governance and administration will be vital to gaining traction in the current market, particularly for schemes at the smaller end of the market.
“Yesterday the PPF announced it hopes to reduce the levy from £200m to £100m. It will be a source of frustration that legislative constraints prevent the PPF from reducing the levy further given its data continues to prove the improved funding environment.”
Kieran Mistry, Senior Business Development Manager at Standard Life, part of Phoenix Group: “Funding positions for UK defined benefit schemes remained broadly unchanged at the end of August 2023. The aggregate section 179 funding ratio for the 5,131 schemes in the PPF 7800 Index now stands at 146.2 per cent at the end of August 2023, compared to 146.4 per cent at the end of July 2023.
“The robust and steady figures from the PPF’s latest update reiterate that many DB schemes will have achieved or be close to full funding levels. As rates continue their steady rise, funding levels remain markedly improved from this time last year, with many schemes now focused on locking down risk and improving member benefit security.
“It is anticipated to be a record-breaking period for BPA activity, with a strong finish to the year and no end in sight as we start to look to early 2024. As ever, trustees and sponsors looking to de-risk should focus on preparation as a key priority. We’re also seeing flexibility becoming increasingly critical for schemes looking to navigate a constantly evolving market.”
Vishal Makkar, Head of Retirement Consulting at Buck, A Gallagher Company, comments: “The last month saw a marginal fall in the aggregate surplus of DB schemes in the PPF Index as total assets fell further than liabilities. As a result, the total number of schemes in deficit increased by 15, but the vast majority of those in the Index - over 90% - maintained a surplus, moving into September in a solid funding position. The overall funding ratio is still above 146% and DB scheme funding remains solid as we approach the anniversary of last year’s Mini Budget.
“Funding levels have been in a healthy position for quite some time now and a lot of the wider conversation around these mature, well-funded, DB schemes has moved onto whether and how this surplus might be put to use. The government has made clear its desire to unlock some of this money to stimulate economic growth in the UK and has invited the industry to respond to these proposals via a consultation. This is an important opportunity for trustees to voice their opinions and play a role in shaping the future of the DB pension landscape.
“Last year’s Mini Budget was a clear reminder of how much immediate and transformative impact government policy can have on our sector. As we start to look ahead to this year’s Autumn Budget, which is expected in November, trustees will likely be carefully analysing the proposals from the DWP and thinking hard about what will be in the best interests of their scheme members.”
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