The total surplus of U.K. corporate defined benefit funds covered by the Pension Protection Fund, London, rose to £313.8 billion ($366.8 billion) at the end of August, up from £254.3 billion the previous month, largely due to rising bond yields.
One year earlier, the PPF deficit was £92.9 billion at the end of August 2021, according to the PPF 7800 index released Tuesday.
Lisa McCrory, PPF's chief finance officer and chief actuary, in a statement released Tuesday said the increase in bond yields was the sharpest since January 2009, and improved the funding position for PPF pension funds overall by £59.5 billion. The "unprecedented" rise in bond yields "was mainly a result of the Bank of England's forceful approach to tackling inflation, their plans to sell off gilt holdings, and expectations that the new prime minister's program of tax cuts and energy market intervention will cause a material increase in the U.K.'s borrowing," Ms. McCrory said.
The PPF is the lifeboat fund for defined benefit plans of insolvent U.K. companies. It covers 5,215 pension funds, of which 1,134 are in deficit and 4,081 are in surplus.
The August funding ratio increased to 125.1% from 118.2% at the end of July, PPF reported. That compares with 105.4% reported for August 2021.
For the 21.7% of all PPF pension funds that are in deficit, the aggregate deficit dropped to £14.3 billion, down from £29.8 billion the previous month. And there were fewer pension funds in deficit, with 1,134 compared with 1,490 at the end of July 2022 and 2,321 at the end of August 2021, PPF reported.
The 78.3% of PPF pension funds in surplus — 4,081 — at the end of August, compared with 3,725 at the end of July 2022 and 2,894 at the end of August 2021.
Total assets of PPF pension funds were £1.57 trillion at the end of August, a 5.4% drop from July, while total liabilities were £1.25 trillion, a drop of 10.6% from July.
