First Actuarial’s Best estimate (FAB) Index improved in May, showing a month-end surplus of £295bn across the 6,000 UK defined benefit schemes.

Whilst it might not grab the headlines, the FAB Index provides the voice of reason in demonstrating that the best estimate position of the UK’s defined benefit schemes is in good health, with a gradual upward trend as a result of Trustees and employers funding schemes in a sensible and prudent manner.

The technical bit…

Over the month to 31 May 2017, the FAB Index improved, with the surplus in the UK’s 6,000 defined benefit (DB) pension schemes increasing from £287bn to £295bn.

The deficit on the PPF 7800 index also improved slightly over May from £245.6bn to £232.3bn.

These are the underlying numbers used to calculate the FAB Index over the last 3 months

The overall investment return required for the UK’s 6,000 DB pension schemes to be 100% funded on a best-estimate basis – the so called ‘breakeven’ (real) investment return – has remained at around minus 0.8% pa. That is, a nominal rate of just 2.8% pa.

The assumptions underlying the FAB Index are shown below:

Assumptions Expected