Charlotte Fletcher, Business Development Actuary at Standard Life: “Funding levels for UK defined benefit pension schemes remained encouragingly stable in July. The aggregated surplus of the 5,050 schemes in the PPF 7800 index increased from £473.6 billion at the end of June, to £475.5 billion at the end of July. However, the aggregated section 179 funding ratio for the 5,050 schemes decreased slightly to 148.5 per cent at the end of July 2024, from 149.4 per cent at the close of June 2024[1].
“Despite macro-economic trends over recent weeks, including market volatility, and the Bank of England’s decision to cut interest rates, the de-risking market is likely to remain robust. Schemes continue to be a strong position to move forward with their endgame strategies, with 4,589 schemes in the PPF 7800 Index in surplus according to the latest figures.
“Looking ahead, effective preparation will continue to be critical, particularly with the publication of the TPR Defined Benefit funding code in July. Trustees will be focused on ensuring strategies align with this framework as they look to progress with their de-risking objectives.”
Sarah Elwine, Actuarial Director at leading independent consultancy Broadstone, commented: “The latest funding estimates for Defined Benefit pension schemes from the PPF showed that funding remained steady with a slight uptick in the aggregate surplus.
“The figures largely do not take account of the Bank of England’s first rate cut in four years and the burst of market turbulence following the Fed’s rate hold and weaker than expected labour figures. It is a reminder to trustees and scheme managers that market volatility remains present especially as economies plot a route to lower rates.
“In a falling yield environment, schemes should be reviewing their hedging ratio and even considering introducing hedging, where perhaps they have resisted previously. Now is a good time for trustees and employers to leverage improved funding positions and also consider the impact of the Regulator’s new funding code to agree on longer term plans.”
Vishal Makkar, Managing Director, UK Wealth Consulting at Gallagher: “In July, the overall aggregate surplus of DB schemes showed signs of stability, buoyed by the end of the general election and its associated uncertainties. During this period, it is the responsibility of the trustees to ensure their schemes are fit for an endgame option, especially during such a competitive time in the insurance company buy-out market.”
“Timelines can accelerate quickly, meaning that trustees and sponsors must collaborate to gather the correct support so their scheme can successfully meet its long-term objective. The final DB funding code is another pivotal milestone for these schemes, allowing them to plan with greater certainty after a prolonged wait. The final code offers some increased flexibility, and many schemes will need strategies to avoid trapped surpluses and tailor their funding and investment plans to their specific circumstances.”
View the August update and see the supporting data on the 7800 Index for 31 July 2024 here: The PPF 7800 index | Pension Protection Fund.
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