UK DB pension surpluses hit record £223bn, XPS analysis shows

UK DB pension surpluses hit record £223bn, XPS analysis shows

08 Sep 2025

• XPS Group estimates that the aggregate surplus of UK pension schemes against long-term funding targets remains extremely positive, reaching record levels of approximately £223bn up £50bn over the last 12 months, including £11bn over the last month alone.
• Aggregate scheme assets declined slightly over August 2025, as matching assets fell in value as bond yields rose to their highest level this century
• Aggregate scheme liabilities also fell, driven by a substantial increase in gilt yields

UK defined benefit (DB) pension schemes have reached a record aggregate surplus of approximately £223bn against long-term funding targets, according to new analysis from XPS Group. The figure reflects an increase of £11bn over August and £50bn over the past 12 months. The improvement was driven by a substantial rise in gilt yields during the month, which reduced liabilities by more than asset values.

As at 31 August 2025, total DB scheme assets stood at £1,151bn and liabilities at £928bn. This equates to an aggregate funding level of 124% of the long-term value of liabilities, up from 116% at the same point last year.

Jill Fletcher, Senior Consultant at XPS Group, said: “Funding levels of defined benefit schemes strengthened over August 2025, as schemes that are not fully hedged against interest rate changes benefitted from the significant rise in gilt yields. This led to liabilities reducing in value by more than scheme assets.

“This comes at a critical time, as we approach the first anniversary of the funding and investment strategy regulations applying to scheme funding valuations. Many DB schemes approaching their first valuation under these regulations will already be fully funded on, or above, a long-term funding basis.

As surpluses continue to increase, the distribution of that surplus remains a key discussion between Trustees and Sponsors. Many schemes will continue to aim to insure benefits through buy-in or buy-out, but will still need to make decisions on how the surplus should be used. The potential to run-on a scheme and make use of recently announced surplus flexibilities is likely to be actively considered by more schemes as we continue to see surplus growth.”

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/