Pensions - Articles - Steady January amongst gilt yield rise

 The Broadstone Sirius Index finds that the fully hedged scheme lost ground in January with its funding level falling by 0.5 percentage points, a decline from 68.9% to 68.4%, as a consequence of gilt yields rising around 0.3 percentage points during the month.

 The half hedged scheme’s funding level increased by almost a full percentage point, rising from 96.1% to 97% through the first month of 2024.

 In a return to the rising rates experienced during 2022 and 2023, assets and liabilities – and so therefore the deficit - shrank, with a £0.2m funding improvement in the fully hedged scheme and a £0.3m in the half hedged scheme.

 David Brooks, Head of Policy at Broadstone, said: "The publication of the funding regulations which will form the basis for the new Funding Code were recently published.

 “Despite the recent rhetoric from the government about increasing risk for Defined Benefit schemes, the actual direction of travel remains clear for many schemes. The focus of the regulations, and our index, is the journey to low dependency where risks in funding, investment and covenant are properly understood and controlled.

 “Importantly for some schemes, where there is a deficit there will be pressure to improve the scheme’s financial security which could mean an increase in contributions for sponsors.

 “One important fall-out from the new regulations and code will be more work for schemes when conducting their valuation - for those schemes in a strong position, the value of this may be hard to understand.”