Pensions - Articles - Scheme funding deteriorates in October

 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 finds that both the 50% hedged scheme and fully hedged scheme experienced a slight deterioration in their funding levels during October, as all asset classes fell.

 Rising interest rate expectations caused a reduction in the liabilities and matching assets but falls in growth assets caused the total value of assets to fall by more than the liabilities.

 The additional exposure to interest rate movements by the fully hedged scheme caused its funding level to deteriorate more than for the half hedged scheme.

 Through the month the fully hedged scheme dropped back from 68.4% to 67.2%, with the 50% hedged scheme declining from 98.2% to 97.6%.

 The market environment through 2023 has been characterised by rising interest rates driving falls in both assets and liabilities which has protected funding levels.
 

 Chris Rice, Head of Trustee Services at Broadstone noted "Economic concerns caused most asset classes to fall in October, which has unsurprisingly been replicated in the funding levels of our schemes.

 “The schemes’ liabilities are now at a level consistent with the position a year ago, which was in the midst of the LDI crisis. Thankfully, the volatility of last year has not been repeated, and both schemes are exhibiting a more stable funding level and deficit value.

 “Nevertheless, Trustees should continue to review their investment strategy to ensure that any opportunities to reduce volatility are taken up.”