The U.K.’s defined benefit and hybrid universe continues to shrink at a consistent rate, down 2% to 5,297 plans in 2023, while almost three-quarters of plans are now in surplus, according to The Pensions Regulator.

Statistics show 73% of all DB pension plans are estimated to be in surplus on a funding basis, compared with just 50% the year before. The total deficit has also more than halved, reducing to £27.7 billion ($35.3 billion) from £63.6 billion.

The percentage of DB plans that are now frozen increased to 72% from 70% over the year.

“Driven by material increases in government bond yields and strong asset returns, the market has been alive to this seismic shift,” Laura McLaren, head of DB actuarial consulting at Hymans Robertson, said in an emailed comment. “Nevertheless, it makes for interesting reading with so much market and regulatory change in the pipeline and a (U.K. government) election on the horizon.

“The TPR and Department for Work and Pensions are currently wrangling to make sure the final regulations and funding code are fit for purpose and proportionate given that there is now a very small, and reducing, number of poorly funded schemes,” she added.

The U.K. is also undergoing a series of reforms, known as the Mansion House Compact, which aims to give DC plan participants access to the returns of high-growth private companies as well as encouraging entrepreneurs to set up innovative high-growth companies.

Simon Kew, head of market engagement at consultancy Broadstone, said of the TPR data: “The findings continue to confirm a universe that is reducing in number as more schemes manage to buyout and one which has seen drastic progression in funding positions.”

“For schemes and trustees, the findings once more re-iterate that the insurance market will be intensely competitive in 2024 and, most likely, through the next couples of years,” Kew added.

2024 is expected to be another record year for buy-in volumes of DB plans in the U.K., exceeding the £50 billion ($63.8 billion) in bulk annuities in 2023, according to an annual pension risk transfer report by Hymans Robertson.

Andrew Goddard, partner at pensions management firm Isio, said in a separate comment: “TPR’s report shows the DB market is shrinking as funding levels improve and schemes mature towards end-game scenarios.”

“Trustees and sponsors are facing crucial decisions around optimal management of assets and liabilities and are increasingly realizing the benefits of consolidation. They are considering consolidation not just to improve efficiencies and better protect member interests, but also because it is often the stepping stone they need to secure their preferred end-game solution,” he said.