The average funding level for defined benefit (DB) pension schemes across large charities has exceeded 100% for the first time, according to new analysis by Hymans Robertson.
Last week, the pension and financial services consultancy published its annual report on DB pension funding in the charitable sector, which looks at the exposures of the largest 40 charities by income in England and Wales.
The report says that, across the charities, there has been a rise in funding levels from 81% in 2019 to 104% in 2025, “the first time we’ve seen average funding in surplus”.
It says that “despite volatile markets and growing global uncertainty, charities with DB schemes have continued to see improving financial positions”.
The combined reserves of the 40 charities, which include Nuffield Health and the Charities Aid Foundation, now sit at £49bn, a £10bn increase since 2019.
‘Significant turnaround in funding’
The report reveals that combined assets and liabilities of the DB pension schemes fell from £9bn in 2019 to around £6.5bn in 2025, “with a larger drop on the liability side”.
“This has resulted in an improvement in funding levels to over 100%, which is a significant turnaround in funding over the last few years,” it says.
“There’s been over a 5% increase since 2024 (25% since 2019) and it’s the first time we've seen average funding levels above 100%.
“The improvement in funding brings endgame options much closer and may open up new options for some.
“Trustees and employers should consider all their options and start detailed planning for their chosen endgame.”
The report finds that unrestricted income from fundraising and charitable activities decreased to just below £10bn, while restricted income totalled £5bn, representing an overall £2m increase from the £13m recorded in 2019.
Charity income maintaining ‘a strong position’
Heather Allingham, partner at Hymans Robertson, said: “Charity schemes have seen a significant turnaround in funding over the last five years, with a particular jump in funding level over the last two years.
“Charities should now be in a strong position to consider and target their endgame, whether that be insurance, run-on or a consolidator option.
“Charity income is also maintaining a strong position at around £15bn this year, up from £12.6bn in 2019.”
Allingham said alternative endgames to insurance might be becoming “more viable for charity schemes, with run-on and consolidators becoming more mainstream”.
“The pending pension schemes bill is likely to make extraction of surplus more viable for some, making run-on more attractive.
“Changes here could allow schemes to generate funds for both the members of the scheme and to support their wider charitable activities.
“Consolidating into superfunds is becoming a viable option for smaller schemes. Largely because it provides security for their members’ benefits at a lower cost.”
She recommended that charities and their pension scheme trustees get ready for the new funding code, “with a particular focus on the appropriate level of risk in their asset strategies and consideration of how to best measure the covenant strength of the charity”.
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