Tuesday 11 May 2021 2:43 pm

More private sector DB pension schemes in surplus than deficit as UK moves toward economic recovery

The funding of private sector defined benefit (DB) pension schemes in the last year has become healthier, with the number of schemes in surplus greater than those in deficit.

Last month, of 5,318 private sector DB schemes, there were 2,622 schemes in deficit and 2,696 in surplus, according to figures from the Pension Protection Fund’s (PPF) 7800 Index.

Schemes facing a funding deficit are more likely to fall to the PPF if the employer faces insolvency, and as a result, members of those schemes could see a 10 per cent reduction on their pension payments.

The total deficit of schemes in deficit at the end of last month stood at £135.8bn, down from £144.3bn at the end of March, according to the PPF.

Meanwhile the aggregate surplus of the private schemes measured by the PPF was estimated to have increased to £53.7bn at the end of April 2021, from a surplus of £34.2bn at the end of March 2021.

By comparison, in April 2020, near the beginning of the UK’s first national lockdown, the number of schemes in deficit was 3,503, meaning in one year nearly 900 schemes have moved from funding deficit to funding surplus.

In addition, the total deficit of the schemes in deficit in April 2020 was £256.4bn, more than £100bn higher than today’s figures.

PPF chief financial officer and chief actuary Lisa McCrory said the figures were encouraging.

“The funding position of our PPF 7800 Index has seen a small improvement in April, with the surplus of the 5,318 schemes increasing by nearly £20 billion.

“This is primarily due to an increase in the value of equities. For only the second time in the Index’s fifteen year history there are now more schemes in surplus than in deficit.”