XPS Pensions Group has estimated that the aggregate surpluses of UK pension schemes more than halved over March to £25 billion.

XPS, the pensions actuarial, consulting and administration business, said a fall in long-term gilt yields of around 0.3% led to an increase in the value of liabilities, worsening the funding level of schemes.

XPS said increases in scheme assets over the month, driven by many schemes’ hedged investment strategies, has partially offset these liability increases.

However, drops in equity markets, caused in part by the high-profile collapse of some banks over the month, has had a detrimental impact on schemes’ overall funding positions.

“Across March 2023, UK pension schemes’ funding positions have fallen by c.£43bn against long-term funding targets,” said XPS.

“Based on assets of £1,477bn and liabilities of £1,452bn, the aggregate funding level of UK pension schemes on a long-term target basis was 102% as of 30 March 2023.”

Charlotte Jones, Senior Consultant at XPS Pension Group, said: “The significant improvements in funding levels seen throughout 2022 have been partially unwound by falling gilt yields over March, driven by the banking crisis.

“This shock to the market shows that the volatility seen over 2022 looks set to continue through 2023. Any schemes without significant hedges will have seen plunging funding levels, rewarding those trustees that implemented de-risking investment strategies to lock in stronger funding positions.”