The total surplus of U.K. corporate pension funds covered by the PPF 7800 index fell slightly in October to £441.4 billion ($535.6 billion), an update said.
The aggregate surplus was down by 1.2% vs. figures as of Sept. 30. However, the funding ratio remained steady over the month at 147.5%, the Pension Protection Fund, London, said in its November update. The surplus increased by 16.4% over the year, while the funding level grew from 136% as of Oct. 31, 2022.
While total assets fell by 1.2% in October, to £1.37 trillion, liabilities also fell by 1.2%, reaching £929.6 billion as of Oct. 31. For the year, assets fell by 4.2%, with liabilities falling by 11.7%.
As of Oct. 31, 90.8% of the 5,131 pension funds covered by the index were in surplus, with the remainder in deficit. That compares with 91% of plans in surplus as of Sept. 30, and 86.2% as of Oct. 31, 2022.
However, while the numbers appear steady, markets have not been, the PPF said in the update. The steady funding ratio "masks a somewhat challenging month for asset markets with global bond markets grappling with continued heavy government issuance as well as the uncertain long-term outlook for interest rates; the latter potentially driven by divergent views amongst central bank policymakers in response to incoming economic data," said Shalin Bhagwan, PPF chief actuary and interim chief financial officer, in the update. "This led to market volatility, both in gilts and return assets, and the overall result was that the estimated value of both assets and liabilities fell slightly."
Given the "marginal changes" in the total surplus of the pension funds, as well as the increase in the proportion of plans in deficit, "it is important to bear in mind the approximate nature of the PPF 7800 in projecting assets and liabilities. However, as our Chief Investment Officer, Barry Kenneth, said while giving evidence at the Work and Pensions Select Committee last week, it plays a vital role in helping us to understand the underfunding risk in the PPF eligible universe, where it also provides context for the wider PPF levy and investment strategies," Bhagwan added.