The aggregate funding position of the Local Government Pension Scheme (LGPS) has improved to 103%, according to Isio’s Low-Risk Funding Index.
Following on from the results of the first edition in July, the index revealed a £4bn improvement of the scheme’s funding position at 31 August 2023, with it peaking at almost 108% part-way through the month.
This improvement is largely due to an increase in UK government bond yields, which reduces the value of liabilities, particularly offset by small reductions to asset values.
Commenting on the results, Steve Simkins, Isio’s partner and public services leader, said: “We are seeing an increase in the number of employers seeking to review the financial position of their LGPS participation, given the significant improvement in funding positions.”
According to the index, of the LGPS’s 87 participating funds, 51 have funding levels of 100% or higher, with the overall levels ranging from 68% to 152% funded.
Isio warned that the results for 2023 show that the funding levels of LGPS funds remain consistently higher than levels in the previous year, which were used to set funding and investment strategies that may no longer be appropriate under current conditions.
“It remains our strongly held view that the Department for Levelling Up, Housing and Communities and the LGPS Scheme Advisory Board should urgently engage with these changes. And we expect funds to consider whether widespread contribution rate reviews should be carried out for employers, as well as supporting those employers who wish to explore de-risking opportunities,” Simkins added.
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