The latest release of the Financial Survey of Pension Schemes (FSPS) by the Office for National Statistics reveals the performance of UK funded occupational pension schemes for the period of October to December 2022. The survey provides insights into membership, income and expenditure, transactions, assets, and liabilities of these pension schemes.
Key findings from the survey indicate a decrease in the market value of private sector defined benefit and hybrid pension schemes during the fourth quarter of 2022. The market value fell by £39 billion (3%) between 30 September 2022 and 31 December 2022. This decline follows a series of falls in the previous three quarters, amounting to a total decrease of £118 billion (8%). The decrease in market value is attributed to schemes deleveraging in response to the increases in gilt yields observed in late September to early October 2022.
Alongside the decline in assets, total non-pension entitlement liabilities decreased by £59 billion (26%), and the total negative net derivatives balance also reduced by £30 billion during the same period. Private sector defined benefit and hybrid liability-driven investment (LDI) pooled fund holdings, which reflect an increase in the value of gilts, rose by £33 billion (25%) between 30 September and 31 December 2022.
The survey also highlights that private sector defined contribution schemes hold a smaller proportion of illiquid assets compared to defined benefit and hybrid schemes. This information is published for the first time in this release.
The decrease in market value for private sector schemes can be primarily attributed to the larger percentage fall in the market value of private sector defined benefit and hybrid schemes due to their greater exposure to gilts. This decline aligns with the rise in global bond yields as developed economies transitioned away from historically low interest rates through a series of interest rate hikes by central banks.
During the same period, the market value of public sector defined benefit and hybrid schemes, along with private sector defined contribution schemes, also experienced a decrease of £50 billion (7%).
The survey provides valuable insights into the dynamics of the UK’s funded occupational pension schemes, shedding light on the performance and trends within the pension industry. Stakeholders and policymakers can utilize this information to make informed decisions and shape future pension policies.
The next release of the Financial Survey of Pension Schemes is scheduled for 21 September 2023, providing an updated snapshot of the pension landscape in the UK.