Deficits for half-hedged and fully-hedged schemes remained relatively stable throughout the month of July, according to the Broadstone Sirius Index.
The Broadstone Sirius Index’s July update highlights the fully hedged schemes’ consistent success in terms of financing stability. These schemes kept their funding level steady, remaining at 69.6 per cent as the month came to an end.
Broadstone says that although funding improved slightly over the month from June’s 69.5 per cent, it still represents a modest decline from the end total of 2022, which was 70.8 per cent.
The 50 per cent hedged scheme made a small gain with a 0.7 percentage point funding level improvement, maintaining its strong funding position at 97.8 per cent. This increase in financing is similar to a gradual increase from the 95.4 per cent position seen by the end of 2022.
Broadstone head of policy David Brooks says: “Pension funding conversations with Trustees and sponsors are not meant to be exciting and our experience over the last few months has shown that things are calming down.
“All those involved with defined benefit (DB) schemes want to see small positive improvements but without great leaps either way. Movement in the extremes up or down suggest risk which is something we want to remove from DB funding conversations.
“The rhetoric from government to find ways to increase risk in DB pension schemes, should be understood in the context that not all schemes are fully funded on a buy-out basis. Funding has improved, but for many schemes there is some way to go until their members’ benefits are secure.
“Employers are still on the hook for millions of pounds in buy-out deficits and understanding and controlling the risks they’re exposed remains paramount. Let’s not forget our funding basis is focused on low dependency which means both our schemes will have significant buy-out deficits that still need to be filled.
“The government’s desire to increase risk may be misstep as the schemes that can buy-out will and the ones that can’t continue their slow and steady journey.”
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