Pensions - Articles - Pension scheme surpluses improve over April

 Across April 2023, UK pension schemes’ funding positions have improved by c.£35bn against long-term funding targets. Based on assets of £1,442bn and liabilities of £1,389bn, the aggregate funding level of UK pension schemes on a long-term target basis was 104% as of 28 April 2023.

 As schemes’ funding levels improve, many are looking to pursue risk settlement options and are selling illiquid private market assets to put them in the best possible position to do so. At the same time, highly hedged schemes are also selling their illiquid allocations to ensure they have sufficient liquidity to support their hedging portfolios, given the recent strain within the LDI market. This is leading to a situation in which some private assets are trading at discounts of up to 20%.

 Felix Currell, Senior Consultant at XPS Pensions Group said: “The discounts we’re currently seeing in the market for private assets presents opportunities for schemes that can tolerate some illiquidity. However, not all private markets assets represent good value and trustees must tread carefully and consider any allocation in the wider context of their scheme.”