U.K. corporate defined benefit funds covered by the PPF 7800 index moved into a surplus of £14.6 billion ($20.3 billion) as of Feb. 28, the first time the plans have not been in deficit in almost two years.
The last time they were in surplus was in April 2019, the Pension Protection Fund, London, said in an update. That month, the funded ratio was 101.4%, a PPF spokeswoman said.
As of Jan. 31, the 5,318 pension funds covered by the index had an aggregate £65 billion deficit. As of Feb. 29, 2020, the deficit was £124.6 billion. The PPF is the lifeboat fund for DB plans of insolvent U.K. companies.
The funded ratio of these plans improved to 100.8% as of Feb. 28, up from 96.5% in January and 93.2% in February 2020.
Total assets fell 3.8% in February but grew 1.1% for the year to £1.72 trillion. Liabilities fell 7.9% in February and fell 6.5% for the year to £1.73 trillion.
The FTSE All-Share index gained 2% in February and 3.5% for the year, while the FTSE All-World ex-U.K. index gained 0.5% in February and 20.3% for the year. Five-to-15-year gilt yields gained 24 basis points and 5 basis points for the month and year, respectively.
"Improvements were driven by an increase in bond yields which reduced the value of bonds and led to a fall in the value of liabilities and assets," Lisa McCrory, chief finance officer and chief actuary at the PPF, said in the update.
"While this is welcome news, it's a reminder of how sensitive funding is to yield movements as many schemes don't completely hedge this risk," she said. "Despite this strong position, we recognise the situation remains uncertain."
The 53.4% of the 5,318 pension funds covered by the index were in deficit as of Feb. 28, vs. 59.2% as of Jan. 31. As of Feb. 29, 2020, 64.4% of the 5,422 pension funds in the index were in deficit.
