The funding level of defined benefit (DB) pensions industry hit its highest since 2014 in the last financial year, but trustees have been warned to remain vigilant.
The aggregate funding level of final salary schemes increased by 5.2%, on an s179 basis, to 95.7% in the year to the end of March, according to the Pension Protection Fund (PPF). This saw the industry deficit fall by more than half in 12 months to £70.5bn from £161.8bn.
The gains were the result of higher gilt yields, rising equities, updated valuations and fewer DB schemes with the number of PPF eligible schemes falling to 5,450 from 5,588 in 12 months.
Despite the improvement the average time to wipe out a scheme’s deficit has not fallen, remaining at almost eight years.
The PPF warns that with the current economic and political backdrop and stock market volatility that sponsors should continue with their strategies to de-risk their pension schemes, which usually involves selling equities to move into less volatile assets.
The pension lifeboat’s funding level has increased slightly to 122.8% from 121.6% in 2017.