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A stable start to 2023 for UK defined benefit schemes

A stable start to 2023 for UK defined benefit schemes

08 Feb 2023

  • XPS Pensions Group estimates the aggregate funding level of UK pension schemes remained broadly unchanged during the first month of 2023 at 104% on a long-term target basis.
  • A fall in gilt yields of 0.25% over January and the resulting increase in liabilities were partially offset by long-term inflation expectations falling by 0.1% over the month.
  • The strong performance of global equity markets combined with narrowing credit spreads and positive returns for corporate bond markets helped to further offset the impact of falling gilt yields, meaning funding levels remained relatively stable over the period.
  • This stability will be welcome relief after previous market volatility and provides an opportunity for schemes to assess their long-term investment strategies.

Across the first month of 2023, UK pension schemes’ funding positions have fallen by c.£4bn against long-term funding targets. Based on assets of £1,490bn and liabilities of £1,434bn, the aggregate funding level of UK pension schemes on a long-term target basis was 104% as of 31 January 2023.

Analysis from XPS’s DB:UK funding tracker also shows that DB scheme durations have fallen significantly over 2022 from 19 to 15 years in conjunction with the significant rise in gilt yields and improved funding positions. Following The Pension Regulator’s recent publication of its draft funding code, Trustees will need to consider this fall in durations when setting their journey plans.

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​​​​​Charlotte Jones, Senior Consultant at XPS Pensions Group said: “Schemes fared well against their long-term targets in 2022, withstanding market volatility and gaining from partially unhedged positions against interest rates. Trustees of all schemes should now be looking to this period of relative calm as a great time to re-assess their investment strategies, including the opportunity to de-risk and lock in some of the gains made during 2022 through full or partial buy-ins.”


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%. It combines XPS’s market leading Member Analytics and 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:


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