DB pension surpluses up £41bn in the last year, although latest mortality trends may slow increase XPS analysis finds

DB pension surpluses up £41bn in the last year, although latest mortality trends may slow increase XPS analysis finds

11 Aug 2025

• XPS Group estimates that the aggregate surplus of UK pension schemes relative to long-term funding targets remains extremely positive at ~£211bn, an increase of £5bn compared to the end of last month and £41bn higher than in July 2024.
• In June 2025, the Continuous Mortality Investigation (“CMI”) released its latest mortality projections model, incorporating data up to 2024. For the first time since the COVID-19 pandemic, the new mortality projections model suggests a modest increase in life expectancy, although life expectancy remains below pre-pandemic expectations.
• Adopting the new CMI model may lead to a small reduction in surpluses, but Trustees and Employers will need to tailor the model to reflect the impact of post-pandemic stresses, which vary depending on the age and socioeconomic profile of a scheme’s membership.

Since July 2024, UK pension schemes’ funding positions have improved relative to long-term funding targets, according to new analysis from XPS Group. With assets totalling £1,163bn and liabilities of £952bn, the aggregate funding level of UK pension schemes (on a long-term funding target basis) remains strong at 122% of the long-term value of liabilities. This marks a 24% increase in surplus over the past year, as of 31 July 2025. However, incorporating the latest mortality data in the new projections model may increase liabilities by approximately 1%, potentially reducing funding levels.

At the end of June 2025, the Continuous Mortality Investigation (“CMI”) released its latest model projecting life expectancy in the UK, incorporating death data in England and Wales up to the end of 2024. The new model bucks the trend of recent CMI models, which have projected declining life expectancy. However, Trustees and Employers should tailor the model to reflect how their scheme’s membership may have been impacted by elevated mortality rates since the pandemic, and what any ongoing recovery in mortality rates may look like for their age, sex and socioeconomic profile.

It is also important to note that insurers, who will largely use the model to benchmark their own assumptions, may have already factored in these improvements into their mortality assumptions.

2024 recorded the lowest all-age mortality rates on record in England and Wales, although mortality rates remain lower than those projected before the COVID-19 pandemic. This trend has continued into 2025, with all-age mortality rates remaining comparable to 2024.

However, this trend masks significant variation in mortality improvements across different ages. Whilst pensioner-age mortality has fallen sharply, younger working-age adults continue to experience higher mortality than the 2014-2023 average.

One of the most significant changes to the model is that it now accounts for differing trends in mortality, explicitly including increased mortality rates experienced during the COVID-19 pandemic. This reflects the industry’s adaptation to post-pandemic mortality patterns.

However, Trustees and Employers should remain vigilant when it comes to tailoring these assumptions to reflect the age and socioeconomic profile of their scheme’s membership.

Hannah Traylen, Senior Consultant at XPS Group said: “While we are seeing some positive headline improvements in mortality rates, it’s important to note that these improvements are primarily driven by reductions in mortality at older ages. Trustees and Employers should remain cautious in applying these trends to their funding assumptions, as younger working-age adults continue to experience higher mortality rates than pre-pandemic levels. Schemes must carefully tailor their mortality assumptions to reflect the unique demographic profile of their membership, taking into account factors like age, socioeconomic status, and the ongoing impacts of the pandemic on different groups before they assess the level of their own surplus and make strategic decisions.”

Notes:

XPS DB:UK tracks the funding position of UK defined benefit (DB) pension schemes on long-term funding target and buyout bases, enabling trustees and corporate sponsors to see how their scheme’s funding compares to the wider pensions landscape. The model has been refreshed and relaunched in July 2025 to take account of published information from the Pensions Regulator and Pensions Protection Fund and insight from XPS’s market-leading Member Analytics and the XPS Data Pool.

XPS DB:UK Funding Watch monitors the combined deficit and funding level of UK defined benefit (DB) pension schemes (i.e. all registrable schemes - including hybrids) on a long-term target basis (using a discount rate of Gilts +0.5%) and XPS’s in-house buyout basis. It combines XPS’s market leading Member Analytics and the XPS Data Pool with the award-winning journey planning tool, Radar, enabling real time monitoring of changes and analysis of the reasons behind any movement.

An online version of XPS DB:UK is available here:

https://www.xpsgroup.com/what-we-do/technology-and-trackers/xps-dbuk-tracker/