Pensions - Articles - Fully hedged scheme funding improves as volatility returns

 The Broadstone Sirius Index – a monitor of how various pension scheme strategies are performing on their journeys to self-sufficiency – posts its latest update.

 The Broadstone Sirius Index reports its July update, finding steady improvement in funding for its fully hedged scheme, while the return of global volatility poses challenges for trustees.

 The fully hedged scheme saw funding rise from 68.4% at the end of June to 69.0% at the end of July, marking its strongest month-end funding position since the start of the year.

 The 50% hedged scheme remains in a healthier position but through July its self-sufficiency funding level remained constant at 99.1%.

 David Brooks, Head of Policy at Broadstone, commented: "These figures come together after the news of the first rate cut in four years and, while the vote was close, it was greeted with broad indifference by markets.

 “It is still unclear with expected rises to inflation through the latter half of this year whether we will see more cuts as the Bank of England has indicated a cautious and measured approach.

 “We think this will lead to some further speculation and volatility in yields, while the Fed’s decision to hold rates at the end of July is now driving significant turbulence in global markets as fears grow of a recession in the US.

 “Schemes should be reviewing their hedging ratio and even considering introducing hedging, where perhaps they have resisted. In a falling yield environment, it could be the time to consider this move.

 “We have seen our hedged scheme improve its position relative to the 50% hedged scheme this month and we may yet see further improvements through to the end of 2024.”