U.K. local government pension schemes had "an extremely strong" valuation in 2022 thanks to investment returns, according to an analysis by consultant Hymans Robertson.
Analyzing 2022 results for 73 pension funds with publicly available reporting, out of a universe of 86, Hymans Robertson found that the overall funding level increased to 107% by March 31, 2022, compared with 98.5% two years earlier. The average increase in fund asset values was 27.5%, with some individual funds hitting more than a 30% increase.
The improvement also brought some contribution rate relief, with the average employer contribution rate dipping to 20.8% of pay in 2022, from 21.9% in 2019.
"The outlook for the long-term sustainability of the scheme is robust. In aggregate, current LGPS funding plans have a more than 3-in-4 likelihood of being sustainable over the long term," the analysis said.
Robert Bilton, head of LGPS valuations at Hymans Robertson, said in news release about the report that the pension funds ended 2022 "in a very different environment from which they started with inflation, a worldwide pandemic and a cost-of-living crisis," with short-term inflation more than offset by better-than-expected investment returns.