Sion Cole, Head of UK Fiduciary Business at BlackRock, said: “For the fourth month in a row, the funding levels of DB pension schemes have improved, further boosting the aggregate surplus. A funding ratio increase of 2.5% to 105.6% over May continues the steady upward trajectory for pension schemes in 2021. This continued positive momentum is a welcome contrast from the volatility we saw in 2020.
“As the vaccine rollout progresses and the economy reopens further, schemes will likely be keeping a keen eye on upcoming data to gauge the strength of the economic recovery and the likelihood of the market environment remaining supportive. Bullish near-term forecasts should not cause schemes to overlook the potential headwinds and material uncertainties that remain, with fluctuations in bond yields likely to persist and questions remaining over the likelihood of the UK meeting its “covid roadmap” final deadline.
“Though there is opportunity for schemes to capture the upside of the economic recovery that is underway, uncertainty still abounds, so they must continue to adopt a mindset of proactive portfolio positioning and robust risk management, balancing optimism and caution as the world faces the prospect of ongoing market volatility.”
Vishal Makkar, Head of Retirement Consulting at Buck in the UK comments: “With a further rise in total asset value, the aggregate position of the schemes in the PPF Index remains in surplus, reflecting the optimism of the financial markets. The markets have responded positively as the UK continues to ease lockdown restrictions in line with the government’s Covid roadmap and the country’s immediate economic future remains closely tied to the success of the vaccine rollout.
“There is, however, still clear evidence to suggest that the financial impact of the pandemic is far from over. Indeed, the emergence of new virus variants and the potential threat of future waves may yet necessitate a return to stricter lockdown measures. While there may then be cause for cautious optimism, it’s important to remember that UK pension schemes, sponsors and members are yet to fully feel the long-term impact of the pandemic or the effects of Brexit.”
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