DB deficits fall 28% due to strong returns and BoE rate hike expectation
The collective deficit of defined benefit (DB) schemes fell 28% over the month according to the Pension Protection Fund's 7800 index.
The lifeboat fund said strong investment returns cut the aggregate deficit from £220bn at the end of August to £158bn at the end of the September and noted liabilities also fell.
During September, liabilities decreased by 5.1% and the FTSE All-Share Index rose by 8.4%.
Total assets as measured by the PPF were £1.5trn and total liabilities were £1.7trn.
The funding ratio increased from 87.6% at end of August 2017 to 90.6% at the end of September - and there were 4,079 schemes in deficit and 1,715 schemes in surplus.
Commenting on the PPF figures, BlackRock head of UK strategic clients Andy Tunningley explained robust investment returns and the Bank of England (BoE) shaped the better outlook for schemes.
"Pension schemes have the BoE to thank for their turn of fortune; at its monetary policy committee meeting earlier in the month, the bank delivered a surprisingly hawkish message, articulating a more positive economic outlook and a clear indication that there will be a rate hike in coming months, absent any shocks.
"This spurred a repricing in the UK government bond market; 20-year real and nominal yields both rose by over 20bps, pushing pension scheme liability values lower and funding levels higher.
"Equities have trended higher, with very low volatility, as an improving global economic outlook has been reflected in market pricing."
However Tunningley warned against being overly optimistic.
"Despite world aggregate equities achieving 14% local currency returns since the start of 2017, it's notable how little the aggregate situation has improved: the PPF aggregate index is only up a few percent. What would have happened if equity returns had been less strong - or are less strong in future?"
However, despite positive trend in PPF figures, other indices have been showing different trends.
Last week, PwC's Skyval index, which tracks roughly 5,800 schemes, found asset values had decreased from £1.6trn to £1.5trn by the end of September, while liabilities remained the same at £2trn.
It said funding levels fell from 77.3% to 76.8% over the course of the month.
While PwC's index uses publically held data - including numbers from the PPF - its index is calculated on the basis of the funding measures used to work out cash contributions needed from sponsoring employers.
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