The latest release of Isio’s Low-Risk Funding Index suggests that the aggregate funding position for the 87 funds participating in the Local Government Pension Scheme (LGPS) in England and Wales has improved from 102% at 31 July 2023 to 103% at 31 August 2023, representing an improvement of over £4bn. The funding level peaked at almost 108% part-way through the month of August.
The improvement is due to an increase in UK Government bond yields which reduces the value of liabilities, partially offset by small reductions to asset values. Of the 87 participating funds, 51 have funding levels of 100% or higher. The levels range from 68% to 152% funded.
The results show that funding levels for LGPS funds and their employers remain consistently higher than 31 March 2022 levels, which were used to set funding and investment strategies that may no longer be appropriate under current conditions.
Steve Simkins, partner and public services leader at Isio, says: “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.
“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.
“Within local government, excessive pension contributions constitute unnecessary spend and should be challenged. Reductions to contribution levels could have a significant and positive financial benefit for councils, many of whom are struggling to deliver core services.”
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