The total reserves of the largest 40 charities in England and Wales with defined benefit pension schemes rose by just under a quarter between 2021 and 2022.

According to analysis by Hymans Roberson the value of their reserves increased over this period from £40bn to £49bn.

Also, this period saw a 7% rise in average funding of defined benefit pension schemes.

The increase is “largely due to strong investment performances”.

The research also shows that charity income has dipped to £14bn, although “underlying income from fundraising and charitable activities is slightly up from last year”. Researchers add that fundraising has still not reached pre-Covid pandemic levels.

The average pension deficit now stands at 10% of unrestricted reserves, compared to 23% the previous year.

“Charities have seen an improving funding position over the last year driven primarily by market conditions,” said Hymans Robertson actuary and head of pensions consulting Heather Allingham.

“Although some DB Schemes may have faced some challenges because of the market volatility at the end of 2022, many charities entered 2023 a step closer to being able to buy-out their DB pension scheme with an insurer.

“We expect 2023 is going to be busy for risk transfer and charities should engage with their pension scheme trustees to re-assess their end game plans for their schemes.”

She added that high inflation has “hit some charities hard in terms of wage inflation as well as putting pressure on income”.

“At the same time, pension scheme trustees may be seeking support from their charity sponsors to give pension scheme members discretionary pension increases to help their pensions keep pace with inflation.

“Charities should consider and agree their approach to these requests,” she said.

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