The aggregate surplus of Defined Benefit schemes rose by £247.4 billion through the year to £376.7 billion at the end of December 2022, increasing by a further £5.2 billion in the final month of the year according to the Pension Protection Fund’s January update.
The number of schemes in surplus has saw a significant annual increase from 3,063 to 4,445, while those in deficit dropped more than two-thirds falling from 2,152 to 686.
Commenting, Kieran Mistry, senior business development manager at Standard Life, said: “After navigating the impact of spiking interest rates over the second half of 2022 on Liability Driven Investments, there is renewed focus from pension scheme sponsors on the risks within their legacy DB arrangements. However, many of the schemes that were able to successfully navigate that period have a much-improved funding position heading into 2023.
“This year is already looking like a significant year for the pensions de-risking market, with many schemes finding themselves ahead of schedule on their endgame journey.”
Jaime Norman, senior actuarial director at leading independent consultancy Broadstone said the significant improvement in funding levels was likely to lead to a hugely competitive market in 2023.
“Pension scheme surpluses recorded huge gains in 2022 due to rising gilt yields and falls in liability values despite ongoing global market turbulence and significant UK macro-economic volatility in the Autumn.
“It means that many thousands more schemes will be closer to the end game than last year or than they could possibly have planned for at this point.”
He added: “2023 looks set to be a red-hot year for the market and we expect to see significant transaction volumes throughout the year.
“The challenge for schemes, particular those at the smaller end of the market, is that competition for attracting and engaging insurers will be intense. Trustees and employers must ensure that their preparations are in excellent condition to stand a chance of capitalising on the improvements in funding and securing the benefits of their members for the long-term.”
