Barnett Waddingham, a leading UK independent professional advisory consultancy, has analysed the performance of the FTSE 350 defined benefit (DB) pension schemes over the last 12 months, tracking the remarkable turnaround in fortunes for the UK’s DB pension schemes.
According to comprehensive analysis conducted by Barnett Waddingham, the average time to buyout for the FTSE 350 DB schemes stood at approximately five years as of the end of May 2023, a reduction of over three years compared to the equivalent position in May 2022. The main reason for this significant shift is the substantial increase in bond yields over the year, which has dramatically reduced the value of DB scheme liabilities.
Barnett Waddingham estimate that the average FTSE 350 DB scheme has seen a 10% improvement in its buyout funding level due to these financial market changes. The consequence of this is that at the end of May 2023, they also estimate that approximately one-third of FTSE 350 DB schemes were fully funded on a buyout basis, a substantial increase compared to the 11% recorded in May 2022, as can be seen in the chart below.