Meanwhile, PwC’s Low Reliance Index also shows a record surplus of £415bn. This tracks the position of the UK’s DB schemes based on a low-risk income-generating investment strategy, which should mean the pension scheme would be unlikely to call on the sponsor for further funding.
With surpluses remaining strong, there is continued focus on whether more of the assets held in pension schemes can be invested in productive UK assets.
John Dunn, head of pensions funding and transformation at PwC UK, said: “With a new milestone reached in the funding level of the UK's DB schemes, the drive to increase pension scheme investment in productive UK assets is continuing to gain momentum. Our research suggests that there is at least a £300bn pot of assets that could be accessed to boost investment in UK businesses and major capital projects via release of this surplus to sponsors or direct investment by the schemes. Even using a relatively small portion of this surplus could bring new projects to market, resulting in a supply increase and further investment opportunities using public and private capital.”
Roshni Patel, DC pensions and benefits lead at PwC, added: “It’s not just DB schemes looking at how they can invest in productive UK assets - defined contribution (DC) schemes are also looking to diversify into these alternative assets to boost member pots. An example of this is the recent partnership between some of the UK’s biggest DC pension providers, with a total commitment of up to £1bn to invest in build-to-rent property in the UK. With these types of assets in demand from both DB and DC schemes, not to mention other investors, will there be enough supply to go around? If not, with increased competition for these assets, prices could be set to rise - so it will be important for schemes to continue to assess value for money for their members, ensuring the price they pay doesn’t become over-inflated by market exuberance.”
The PwC Low Reliance Index and PwC Buyout Index figures are as follows:
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