Latest results by LCP’s Pensions Explorer at 31st March 2023 show that the combined estimated IAS19 pensions surplus of FTSE100 companies currently stands at £120bn.

This is the fourth consecutive quarter end where the IAS19 surplus has been over £100bn and demonstrates that recent strong funding positions should not be considered a blip, but are a true reflection of the financial position of UK pensions. As a consequence, companies should be looking to explore and embrace the wide range of opportunities that the current position brings. Whilst settling liabilities through insurance transactions may be appropriate for some, more companies have shifted focus and are now investigating running their schemes to generate value for all parties.

With funding levels robust and strong on all measures, LCP is predicting that there are further improvements coming due to changes in expected future mortality trends. Amid the uncertainty of the long-term impact of the Covid-19 pandemic, new analysis of health data suggests changes in future life expectancy could further improve funding positions by over £5bn. Pension scheme sponsors need to be aware of these changes and avoid unknowingly over-funding their schemes.

LCP is releasing the 30th edition of their annual ‘Accounting for Pensions’ report in May, providing an in-depth analysis of the key facts, figures and trends for FTSE100 schemes and how to navigate the current environment. This will scrutinise the latest corporate accounts for FTSE100 companies and provide a quantitative evaluation of any fallout from 2022 market volatility - in particular, the impact of the September mini budget and identifying the winners and losers promises to be a fascinating development.

Jonathan Griffith, Partner at LCP, commented: “The improvement in funding level over 2022 was no blip as funding levels have been robust and consistently strong. Many schemes are approaching or have now more than reached being fully funded on an insurer basis.

“However, in a changing market with increased competition and rapid innovation, there are more questions for companies around whether this is right and what alternatives there might be. Sponsors need to embrace the opportunities and to reassess ultimate targets as well as the strategy and timescales for getting there.”