Defined benefit schemes in the UK are expected to pay 98.2% of accrued pensions benefits, according to Legal and General.
This represents the fourth consecutive quarterly improvement and is up nearly 7% from the market lows in March 2020.
Furthermore, the “health” of defined benefit pension schemes in the country has also shown a 1.1% improvement quarter-on-quarter against the funding level of 97.1% at 31 December 2020.
John Southall, head of Solutions Research at LGIM, said: “The first quarter of 2021 was yet another good period for our Expected Proportion of Benefits Met (EPBM) measure of scheme health, with the ratio rising by 1.1% from 97.1% at 31 December 2020 to 98.2% at 31 March 2021.
“The change was largely driven by a rapid rise in nominal interest rates, the sharpest three month increase seen in years, benefitting schemes that haven’t fully hedged their interest rate risk.”
He added: “These benefits were partially offset by a rise in expected inflation (increasing inflation-linked liabilities) but growth assets also posted a strong quarter, boosting asset values.
“One notable feature of our EPBM measure is that it cannot exceed 100%. As the EPBM figure edges closer to 100%, continued positive experience for schemes has a smaller marginal impact on our measure.”