Pensions - Articles - Record high gilt yields drive record DB scheme funding

 The Broadstone Sirius Index reports its update for August 2025 with funding improvements across both the fully hedged and 50% hedged Defined Benefit (DB) pension scheme amid rising gilt yields.

 The funding level of the fully hedged scheme rose from 70.9% at the end of July to 71.1% at the end of August, with the deficit falling to its lowest level since tracking started at the beginning of 2022.

 The underhedged position meant the gains in funding were larger for the 50% hedged scheme, increasing from 107.2% at the end of July to 109.0% at the end of August, the highest funding level since tracking began, and the greatest monthly gain of 1.8 percentage points.

 Daniel Broad, Senior Investment Consultant at Broadstone, commented: "Most Defined Benefit pension schemes continued their positive funding level progress in August, with particularly impressive gains made by schemes that are not fully hedged. During the month, medium and long-term UK gilt yields experienced a notable increase, driven by heightened investor concerns over government borrowing and persistent inflation, alongside structurally lower demand from traditional buyers. When gilt yields are more volatile, a scheme’s liability hedge ratio may deviate from its target and introduce unwanted risk. Therefore, we suggest schemes rebalance as required and be prepared for capital calls from LDI de-leveraging events.”