The funding ratio of U.K. defined benefit funds improved marginally in June as rising bond yields offset drops in equities, the Pension Protection Fund said.
The PPF's monthly update on the 5,215 pension funds covered by its 7800 index said the funding ratio increased to 120.1% as of June 30, up from 118.9% as of May 31 and 106.5% at June 30, 2021.
The total surplus of these funds increased 2.4% to £267.9 billion ($325.7 billion) as of June 30. The surplus more than doubled vs. figures as of June 30, 2021, at £107.9 billion.
Total assets fell 2.7% in June and dropped 9.9% for the year. This reflected in part decreasing equity indexes. The PPF update said the FTSE All-World ex-U.K. Total Return index dropped 4.9% in June and fell 4% for the year, while the FTSE All-Share Total Return index lost 6% in June. However, the FTSE All-Share gained 1.6% for the year ended June 30.
However, falls in aggregate assets were more than offset by decreased total liabilities, falling 3.6% in June and by 20.2% for the year. The update said 5-to-15-year index-linked gilt yields were up 37 basis points for the month and increased 130 basis points for the year.
The PPF is the lifeboat fund for the DB plans of insolvent U.K. companies. As of June 30, 1,398 of the 5,215 funds were in deficit, vs. 1,450 in May and 2,257 as of June 30, 2021.
"While this ongoing trend in improved scheme funding is positive, we're mindful that the improvement (is) largely the impact of the current market environment," Lisa McCrory, chief finance officer and chief actuary, said in a news release accompanying the PPF update. "Trustees should continue to monitor market movements to understand how they can take advantage and mitigate future risks on scheme funding."
