Pensions - Articles - Pension scheme surpluses start new year on a high

 This rise was partially offset by aggregate scheme assets increasing over December 2023, driven by schemes’ hedging strategies and positive growth returns.

 Across December 2023, UK pension schemes’ overall funding positions have fallen by c.£28bn against long-term funding targets. Despite this fall, and based on assets of £1,446bn and liabilities of £1,348bn, the aggregate funding level of UK pension schemes on a long-term target basis remains extremely positive and was 107% of the long-term value of liabilities, as at 31 December 2023.

 Danny Vassiliades, Partner at XPS Pensions Group said: “Despite falls in funding levels last month, aggregate DB pension scheme funding levels are still at an extremely positive level as we begin 2024. Significant falls in long-term gilts yields over December following better-than-expected inflation figures and expectations among many of earlier interest rate cuts, are a stark reminder that funding can change quickly as aggregate liabilities increased by c.£80bn over the month.

 The speed of these changes indicates that schemes should continually reassess the appropriateness of their investment strategies, with a particular focus on ensuring they are suitably protected against any potential fall in gilt yields. This is particularly important for schemes looking to protect their current strong funding levels, including those in which buyout is a realistic short-to-medium-term objective.”