DB pension surpluses remain stable over August, XPS analysis finds
DB pension surpluses remain stable over August, XPS analysis finds
09 Sep 2024
- XPS Pensions Group estimates that the aggregate surplus of UK pension schemes on long-term targets remains extremely positive at approximately £176bn, unchanged from the position at the end of the previous month.
- Aggregate scheme assets decreased slightly over August 2024, as equity markets fell sharply in the first week of August and then gradually recovered throughout the rest of the month.
- Aggregate scheme liabilities also decreased slightly, driven by a fall in future inflation expectations.
Over August 2024, UK pension schemes’ funding positions remained stable relative to long-term funding targets according to new research from XPS Group. With assets totalling £1,462bn and liabilities of £1,286bn, the aggregate funding level of UK pension schemes on a long-term target basis remains extremely positive, at 114% of the long-term value of liabilities, as of 29 August 2024.
Henry Shore, Senior Consultant at XPS Group said: “Despite investment market volatility over the month, aggregate pension scheme surpluses have remained stable and stay at record levels.
On the 29th of July 2024, the final draft of the Pension Regulator’s new DB funding code was laid in Parliament bringing trustees, and sponsors, more clarity on how the new Funding and Investment Strategy Regulations will be implemented.
As many DB pension schemes are now fully funded on or above their long-term funding basis, the new funding code provides clearer guidance on the options available to schemes to invest surplus assets in excess of the long-term objective. These options include greater freedom to invest in growth assets, which may form part of any trustee plans to provide future discretionary benefits or for any sponsor plans to extract surplus assets to utilise elsewhere in their business.”
Notes:
XPS DB:UK tracks the funding position of UK defined benefit (DB) pension schemes on a long-term target basis and allows real time monitoring of changes and analysis of the reasons behind any movement.
XPS DB:UK Funding Watch monitors the combined deficit and funding level of UK defined benefit (DB) pension schemes (i.e. all registrable schemes - including hybrids) on a long-term target basis using a discount rate of Gilts + 0.5%. It combines XPS’s market leading Member Analytics and the award-winning journey planning tool, Radar, enabling real time monitoring of changes and analysis of the reasons behind any movement.
An online version of XPS DB:UK is available here:
https://www.xpsgroup.com/what-we-do/technology-and-trackers/xps-dbuk-tracker/