The funding ratio and the aggregate funding position of the 4,969 schemes in the PPF 7800 Index fell in March, down from 126.1% to 124.7% and a £232.7bn surplus to a £215.5bn surplus, respectively.
“Yields in government bonds rose both globally and domestically through March, with the market digesting news that the German parliament agreed to an easing of their debt brake and substantial package of fiscal easing, whilst at home markets reacted to the increased forecast for aggregate gilt sales over the next 5 years following the Chancellor’s Spring Statement,” said Shalin Bhagwan, PPF Chief Actuary.
“This saw the estimated liabilities of schemes eligible for the PPF fall by 2.2 per cent in contrast to a larger 3.3 per cent fall in estimated total scheme assets. The result being a modest reduction in the estimated funding ratio, by 1.4 percentage points, to 124.7 per cent, while the estimated aggregated funding position fell by £17.2bn to a £215.5bn surplus.”
“Defined benefit pension scheme funding levels saw a notable deterioration in March as Government bond yields rose off the back of the Spring Statement. The start of April has seen significant market volatility following President Trump’s announcement of wide-ranging and higher-than-expected tariffs. These market movements are likely to have impacted funding levels and the time horizon of this turbulence also remains uncertain depending on negotiations and retaliations,” added Sarah Elwine, Actuarial Director at Broadstone.
“This volatility emphasises the benefits of a matching investment strategy for schemes. Whilst we wouldn’t expect that trustees would need to take any immediate actions, they may want to consider in due course whether employer covenant for their schemes has been affected by the introduction of tariffs, particularly given the increase in employer national insurance and minimum wage changes also coming into effect this month. Regular strategic monitoring will, of course, continue to be important in helping trustees to understand any impacts that do require action moving forward as the macro-economic landscape shifts.”
The number of schemes in surplus dropped to 3,561, which still represents more than seven in 10 (71.7%) of all schemes in the PPF universe.