The Pension Protection Fund has published the 20th edition of its Purple Book, offering a detailed snapshot of the health of the UK’s defined benefit pension landscape and pointing to a continued improvement in scheme funding levels.
The annual report, which analyses data up to 31 March 2025, shows higher funding ratios, falling liabilities and a further reduction in risk across the sector.
Commenting on the findings, Sarah Garnish, Consultant at Quantum Advisory, shared her insight into what the latest figures mean for schemes, members and the wider pensions market, highlighting several key trends shaping the direction of travel for UK DB pensions.
Improved funding ratios for schemes over the year
Funding levels on a section 179 basis remained similar to last year, with the surplus only slightly decreasing from £219 billion in March 2024 to £213 billion in March 2025. The aggregate funding ratio however increased from 123% in March 2024 to 125% in March 2025. This increase is largely as a result of market movements, with higher gilt yields driving down pension liability values. Despite a small decrease in surplus, the higher funding ratio is the result of the surplus being spread over a lower liability value. On a full buyout basis, the funding ratio also increased from 94% to 96%.
Sarah Garnish, Consultant at Quantum Advisory, said: “Approximately 74% of schemes were in surplus at 31 March 2025 on a section 179 basis, and over 34% were in surplus on an estimated full buyout basis. Funding on an s179 basis as at 31 March 2025, is based on version A11 of the s179 assumptions.”
DB scheme liabilities fall again this year
In the year to 31 March 2025, section 179 liabilities fell from £0.95trn to £0.85trn and buyout liabilities fell from £1.24trn to £1.12trn.
Sarah Garnish, Consultant at Quantum Advisory, said: “The fall in liability values again this year moves even more schemes to the point of being able to afford a buyout. This is placing further pressure on the insurance market, which has already seen unprecedented transaction levels in recent years. Schemes will need to be well-prepared before approaching insurers if they want to access the best pricing.”
Asset allocation remains stable and consistent
Schemes continue to invest largely in bonds, with the allocation rising ever so slightly from 70% in March 2024 to 71% in March 2025. The second highest allocation was equity, which dropped slightly from 16% in March 2024 to 15% in March 2025. In relation to the equity universe, the proportion made up of UK equities continues to fall to a record low of less than 5%.
The proportion of assets held in annuities is at a record high of just under 13% in March 2025, compared to just under 10% in March 2024.
Sarah Garnish, Consultant at Quantum Advisory, said: “As DB pension schemes mature, schemes de-risk by moving their investments into lower risk assets, it is therefore expected that the percentage invested in bonds will remain high in the future.
“Due to the current economic backdrop, many schemes are taking the approach to de-risking one-step further by purchasing annuity policies with an insurer.
“It will be interesting to see with the UK government keen for pension schemes to invest in UK equities whether the UK equity investment allocation for DB schemes in future years will start to increase.”
Reduction in PPF levy
In 2024/25 the PPF raised a lower levy than last year (£105m down from £173m last year). In fact, the only year with a lower levy was the PPF’s very first year in 2006/07. This reflects a reduction in the risks the PPF faces, with reserves at their highest-ever level and lower projected future claims than last year.
Sarah Garnish, Consultant at Quantum Advisory, said: “Due to the PPF’s strong financial position, progress on legislative changes, and support from stakeholders, the PPF will not be charging a conventional levy for 2025/26.”
Demographics
The Purple Book 2025 dataset includes 8.6 million DB scheme members. 47% are pensioners, 45% are deferred members and 8% are active members. These active members equate to just 0.7 million members.
Sarah Garnish, Consultant at Quantum Advisory, said: “The number of active members has fallen each year since the first edition of The Purple Book in 2006, when there were 3.6 million.”
