The issue of pension surpluses has become a much debated issue, so it interesting to see data that reveals the aggregate surplus of the 4,969 schemes in the Pension Protection Fund’s 7800 Index increased by £18.6bn through May, rising from £202.5bn to £221.1bn.
The funding ratio rose by 2.8 percentage points to 125.6% and the number of schemes in surplus rose to 3,569 representing over 7 in 10 (71.8%) of all schemes in the universe.
The data follows the publication of the Government’s Pension Schemes Bill, which aims to deliver increased flexibility for defined benefit (DB) pension schemes to safely release surplus funds.
A DWP assessment though suggested the plans may unlock around £8-11bn, substantially less than the £160bn promoted by the government in the Bill.
The increase in the pension surplus is all the more impressive given the volatility in the markets.
Jaime Norman, senior actuarial director at consultancy Broadstone, said: “It is pleasing that despite continued volatility in global markets, pension scheme funding remains resilient posting notable gains through May. Gains in equity markets offset rising bond yields amid continued uncertainty over Government borrowing and the impact of potential trade wars.”
He said the continued strength of funding could see sponsors rushing to discuss with trustees about the best route forward to release surpluses, to enable greater business investment.
“The increased flexibility from the Pension Schemes Bill, alongside new guidance from the regulator, broadens the options for well-funded schemes,” Norman added.
Now there is clarity over the government’s plans in respect of funding and funding remains healthy, Norman said he would expect a renewed acceleration in pension scheme de-risking into the second half of the year.
“It has been a relatively quiet period for the bulk annuity market as market volatility and uncertainty over the Pension Schemes Bill caused many to take a wait and see approach,” he said.
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