Alex Oakley, BPA Transaction Manager, at Standard Life, part of Phoenix Group: "Funding levels for UK defined benefit pension schemes have increased in October, with the aggregate surplus of the 5,050 schemes in the PPF 7800 Index estimated to have increased to £485.1 billion at the end of October 2024. The aggregate section 179 funding ratio now stands at 151.0 per cent, compared to 148.4 per cent at the end of September 2024. We expect the upcoming Chancellor’s Mansion House speech will provide further detail in this government's agenda for pensions, given these strong funding levels. However, the long-term security of members’ benefits will remain top priority for trustees responsible for these schemes as they work with sponsors to consider how and whether to utilise any increased flexibility. With many schemes in solid funding positions, attention will be on laying foundations that will ensure schemes are in a strong position to navigate potential endgame opportunities. Looking ahead to the end of the year, this will help ensure activity continues at pace in the de-risking market for the remainder of 2024 and beyond."
Jaime Norman, Senior Actuarial Director at leading independent consultancy Broadstone, said: “Defined benefit pension scheme funding saw a notable improvement in October in a month which saw gilt yields increase and growth assets decline. The impact will be a mixed bag for pension schemes but those with the least amount of hedging are likely to have benefitted the most. Over the past couple of weeks, volatility has returned to markets surrounding the UK Budget from the Chancellor and the convincing victory for Donald Trump in the US election. Growth assets have rallied and while we are some distance from the market turbulence experienced in 2022, managing investment risk remains a challenge.”
Vishal Makkar, Managing Director, UK Wealth Consulting at Gallagher said: In September, the PPF 7800 saw an increase in the overall aggregate surplus, albeit a very slight one. The DB pensions sector clicked into a steadier rhythm in October, reaching a total of 4,600 schemes in surplus. As the dust settles from the Autumn Budget and with the Mansion House speech just around the corner, the market finds itself in a fascinating interregnum. DB funding levels are certainly strong, but amid growing rumours of a mandate for schemes to allocate funds into British assets, there is a chance that the pensions sector will become an even more central cog in the UK’s economic machine. In the near and immediate future, DB schemes will be an engine for the country’s further economic growth, so it is up to trustees and sponsors to ensure that members are kept up to date on how any legislative change will affect the scheme’s longer-term strategy. The new DB funding code is now in effect, and long-term risk management must be a priority. We live in an ever-changing regulatory world, and it is up to the trustees to ensure schemes can continue to deliver tangible returns and maintain security of benefits for the membership.”
PPF 7800 Index Update for October 2024
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