The aggregate funding level for the Local Government Pension Scheme (LGPS) in England and Wales rose from 106 per cent at the end of March to 109 per cent as at 30 April 2024, Isio’s latest Low-Risk Funding Index update has revealed.

The index showed that, of the 87 participating funds, 59 have funding levels of 100 per cent or higher, up from 55 in March, while 28 have funding levels less than 100 per cent.

This stands in contrast with the previous actuarial valuation date, 31 March 2022, when the aggregate low-risk funding position was 67 per cent and none of the 87 funds had a funding level of 100 per cent or higher on a low-risk basis.

Isio attributed the funding improvement primarily to the “significant” increase in UK government bond yields and improvements to asset values, noting that the LGPS aggregate funding level has remained at "significantly" higher levels since 31 May 2023

Commenting on the latest improvements, Isio emphsised that the current market conditions are “very good” news for the LGPS and present an immediate opportunity to enhance long-term sustainability for funds and their employers.

In particular, Isio suggested that LGPS funds and their employers should consider their funding and investment objectives in light of significantly improved funding levels, actively review investment strategies, specifically considering whether de-risking opportunities should be taken advantage of.

It also encouraged LGPS funds and sponsors to consider whether certified employer contributions should be reduced before 1 April 2026 to avoid overfunding.

This is not the first time Isio has raised concerns around this, having previously called for an "urgent" review of the LGPS employer contribution rate in light of the funding improvements, particularly given that many employers participating in the LGPS in Scotland continue to be offered contribution rate reductions as part of the 31 March 2023 valuations.

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