U.K. defined benefit plans covered by the Pension Protection Fund saw “significant improvement” in funding levels that could bring more buyouts, according to the lifeboat fund’s 2023 report published Dec. 6.

The PPF’s annual Pensions Universe Risk Profile, known as the Purple Book, showed a surplus of £358.9 billion ($443.3 billion) in the fiscal year ending March 31, with 80% of pension funds in surplus. That was up from surpluses of £193 billion in 2022 and £47 billion in 2021, according to the Purple Book. Aggregate funding ratios increased to 134% in the most recent year, up from 113.1% in 2022 and 102.8% in 2021.

The increased surplus was “mainly the result of rising gilt yields driving down liability values,” the PPF said.

In the fiscal year ended in March, 69% of assets in PPF-covered funds were in bonds. Corporate bonds rose to 46.5% from 30.2% in 2022, while index-linked bonds fell to 44.1% from 47.8% and government-fixed bonds dipped to 19.5% from 22%.

Equities dipped slightly, to 18% from 19.5%. But within that category, private equity had the largest shift, growing to 29.5% of equity investments from 21.5% the previous year. Investments in U.K. equities fell to a record low of 7.7% from 9.9% and overseas equities dipped to 62.8% from 68.6%.

Shalin Bhagwan, chief actuary and interim chief financial officer for PPF, said in a statement that many pension funds it covers are “accelerating towards buyout funding levels.” As more pension funds set insurer buyouts as their end target, “a critical part of their journey will be reducing risk and volatility,” Bhagwan said.

He also addressed a government proposal to have a new vehicle that would address buyout interest while also boosting investment in the U.K. A consultation is expected in the coming months.

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