Broadstone and Gallagher comment as the aggregate surplus of the 4,838 schemes in the PPF 7800 Index improved slightly through June 2026, increasing by £0.2 billion to reach £264.0 billion in surplus with a small decrease to the funding ratio which dropped by 0.1 percentage points to 131.1%. The number of schemes in surplus also registered a slight downturn dropping by 6, from 3,826 to 3,820 representing nearly four in five (79.0%) of all schemes in the universe.
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Jaime Norman, Senior Actuarial Director at Broadstone, commented: “Broadly placid market conditions – at least for recent times – in June meant that the funding position of defined benefit pension schemes remained largely unchanged with just a small increase in the aggregate surplus. Meanwhile, the implementation of the Pension Schemes Act continues to progress which expands the endgame opportunities available to schemes, and we’d expect a busy half year in the pensions derisking market too given elevated funding levels. Geopolitical uncertainty never seems to be too far away and the entrance of a new Prime Minister in the UK as well as the resumption of conflict in Iran demonstrate how vigilant trustees must remain. They will be closely watching inflation expectations and market volatility to ensure their investment strategy remains appropriate for their chosen long-term objectives.”
Vishal Makkar, Managing Director, UK Wealth Consulting at Gallagher comments: “The UK’s DB schemes have kept a level footing, with the aggregate surplus rising to £264.0bn. Funding levels are not the issue. But how trustees should allocate these surplus funds is less clear. The Government currently estimates that the UK’s DB schemes are in a £160 billion surplus, stoking the debate on who should benefit the most: scheme sponsors, members, or insurers through buyout. With the Department for Work and Pensions' consultation on surplus rules closing on 2nd September, trustees and sponsors are weighing up their options. Do they pursue a buyout, run on the scheme, use any excess to enhance member benefits or allow the sponsor to use the surplus e.g. for expenses, another pension arrangement etc.? For smaller schemes or those with weaker sponsor covenants, buyout might be the most straightforward route. For larger schemes with strong governance and sponsor support, running on may be a viable option. When a scheme is approaching the end of its lifecycle, trustees need an evidence-led view of the scheme they actually run, and not the scheme they would like to have. In an evolving market, defining the buffer for a low-dependency funding level is rarely simple, requiring careful and sound judgement. It is up to trustees to weigh pressure from sponsors against their fiduciary duty to protect the interests of scheme members."
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