Local government pension funds in England and Wales saw their aggregate funding levels rise again in September, according to Isio's Low-Risk Funding Index released Nov. 1.
For the 87 funds in the Local Government Pension Scheme in England and Wales, the aggregate funding level rose to 107% as of Sept. 30, up from 103% one month earlier. The uptick was driven by an increase in government bond yields that reduced the value of low-risk liabilities.
The estimates assume a 'low-risk' funding basis for the liabilities that would apply if assets were fully invested in liquid, low-risk investments, such as government bonds. The aggregate funding position combines individual results for the pension funds.
Of the 87 funds, 55 were funded at 100% or higher. The range for all funds was between 67% and 156%.
The September results were an important milestone, the Isio report said, because it is midway through triennial valuations that will be used to determine contribution levels.
Current funding levels have been "much higher" than the 2022 actuarial valuations used to set funding and investment strategies. "Market conditions for pension schemes have improved significantly," and the value of liabilities pegged to gilt yields has fallen dramatically, Isio said.
The report recommends that the LGPS consider their funding and investment objectives, actively review investment strategies with an eye towards de-risking opportunities and consider reducing employer contributions.