It reported that the net funding position on a section 179 basis improved to a surplus of £358.9bn in the year to 31 March 2023, with more than 80 per cent of schemes in surplus. This increase was mainly the result of rising gilt yields driving down liability values.
The report showed a year-on-year acceleration in the improvement in the net funding position, from 2022’s surplus of £193bn compared to a surplus of £47bn the year before that. Similarly, the aggregate funding ratio increased from 102.8 per cent in 2021 and 113.1 per cent in 2022 to 134 per cent in the year to 31 March 2023.
The number of DB schemes in the universe has fallen slightly from 5,131 to 5,063 over the year as result of schemes winding up, merging or claiming on the PPF. The DB universe remains highly fragmented, with a long tail of smaller schemes. Schemes with fewer than 1,000 members make up 80 per cent of the total number of schemes but only around 10 per cent of total assets, liabilities, and members.
Schemes in the universe have continued to invest a large proportion (69 per cent) of their assets in bonds. While there was a small decrease in the proportion of assets invested in equities from last year (18 per cent compared to 19.5 per cent last year), this split between bonds and equities has been broadly stable since March 2020. While the proportion invested in private equities has risen to 29.5 per cent, the proportion of assets invested in UK-quoted equities has fallen to a new record low of 7.6 per cent.
Shalin Bhagwan, the PPF’s Chief Actuary and Interim Chief Financial Officer said: “Over the last year, there has been a material improvement in the aggregate funding position of the schemes we protect. Just as the PPF has entered a maturing phase, the wider defined benefit universe looks to be similarly moving into a new phase with many schemes accelerating towards buyout funding levels. This will likely further sharpen the focus on endgames and the options available to schemes.”
PPF Purple Book 2023 - DB Universe Risk Profile
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