Isio’s Low-Risk Funding Index shows that the aggregate funding position further improved to 108 per cent as of 31 October 2023, as UK government gilt yields continue to rise.
According to Isio, the 87 funds in the Local Government Pension Scheme (LGPS) in England and Wales have a better overall financing position, improving by £2 billion, from 107 per cent on September 30 to 108 per cent on October 31 this year.
This improvement is explained by higher rates on UK government bonds, which lower the value of low-risk liabilities and are partially offset by small reductions to asset values. Out of the 87 funds, 55 have funding levels of 100 per cent or more, ranging from 67 per cent to 157 per cent.
Isio partner and public services leader Steve Simkins says: “Employers participating in the LGPS continue to struggle to meet ongoing costs and their excessive pensions contributions represent a large proportion of these costs. Whilst employers in Scotland are being offered immediate reductions as part of their 2023 actuarial valuation exercise, those in England and Wales are yet to see similar widespread action taken meaning that their contributions will continue until 2026.
“The Autumn Statement failed to provide local authorities with additional funding, further strengthening the case for a review of pensions contributions as funding levels continue to rise as essential local services face reduced funding and/or closure. We urge the Department for Levelling Up, Housing and Communities and the LGPS Scheme Advisory Board, and their Surpluses Working Group, to consider the challenges faced by local authorities and the opportunities available to help.
“The 31 October 2023 results for our Low-Risk Funding Index suggest further improvements to funding levels over the month of October and, for the first time, participating funds are able to view where they rank relative to others. The results demonstrate the significant changes in market conditions since the last actuarial valuation of 31 March 2022 and the opportunities available to offer flexibility to their employers who are struggling financially.”
