The Broadstone Sirius Index, an indicative index simulating two defined benefit pension schemes with different hedging strategies published by consultants Broadstone, finds positive funding progression across both schemes, finishing 2024 in better funding positions than they started it, according to the firm’s latest update.
Funding levels for the 50% hedged scheme saw an increase from 101.4% to 103.4% in December with a £0.5m increase in its surplus to £0.9m. This contrasts to the point at the start of 2024 where the scheme had a £1.2m deficit and 96.1% funding level.
It marks a significant improvement in its funding position, crossing into full self-sufficient funding and the scheme would now be able to explore an insurance transaction to secure the benefits of its members or the possibility of running on.
As might be expected, the fully-hedged scheme has been more stable throughout December and 2024 with the funding level decreasing slightly in the final month of the year from 69.5% to 69.4%. However, the deficit reduced by £0.3m to £8.1m. At the start of 2024 the funding level was 68.9% and the deficit was £8.5m.
“As we look back on 2024, the results of scheme funding have not been surprising in a rising interest rate environment. The fully hedged scheme has made steady progress, but the half-hedged scheme has significantly improved its position crossing beyond full self-sufficient funding,” said Chris Rice, Head of Trustee Services at Broadstone.
“The half-hedged scheme could now derisk to protect its healthy funding position and work towards preparation for a bulk annuity purchase or consider other endgame options. We expect many schemes to be holding similar discussions during 2025,” he added.