Most U.K. defined benefit pension funds saw overall assets fall over the last 12 months, but overall funding levels remain strong, according to a PriceWaterhouseCoopers analysis released Oct. 23.
From June to August, PwC surveyed pension funds with a collective £170 billion ($215.5 billion) in assets and an average £1.7 billion. It found that 93% saw assets fell as a result of falling bond and liability-driven investment prices. For more than half, asset values fell by 20-40%, while 7% saw drops between 40-60%, and 7% saw an increase compared to 12 months ago.
Despite the fall in assets, only one in 10 saw funding levels fall, and 30% surpassed their long-term funding target, a threefold increase from 2022. Of the 74% with improved funding levels, 61% saw improvements of up to 15% and 13% exceeded 15% or more. PwC attributed the improved funding levels largely to rapidly increasing long-term gilt yields that lowered liabilities due to the higher discount rate.
Of those surveyed, 23% are funded between 100%-110%, and 7% are funded above 110%.
John Dunn, head of pensions funding and transformation at PwC, said in the release that many plan trustees and sponsors that did not expect to think about end-game strategies for another decade "have had to review their options," with some rushing to prepare for buyouts or winding down.
Ongoing reforms by U.K. regulators to address defined benefit surpluses is also leading "an increasing minority" of pension funds to consider superfunds, Dunn said.