Defined benefit (DB) pension scheme deficits increased over the past month, Broadstone’s Sirius Index has revealed, with half hedged schemes suffering the biggest monthly funding level fall since September 2022.

The index, which acts as a monitor of how pension scheme strategies are performing on their journeys to self-sufficiency, found that falling gilt yields through March, arguably caused by the shifting view that central bank interest rate hikes will be less extreme due to the banking crisis, increased deficits in the schemes monitored.

However, Broadstone pointed out that schemes that de-risked in the last quarter of 2022 will be seeing the fruits of their efforts, as the fully hedged scheme outperformed the half-hedged scheme for the first time since interest rates started to rise significantly last year.

Indeed, the index revealed that whilst the 50 per cent hedged scheme saw a deterioration in its funding level, the low dependency funding for fully hedged schemes was relatively stable in March as hedging protected schemes against falling gilt yields.

Broadstone also clarified that while both schemes ended the quarter in deficit, they remained in a similar state in funding level terms.

Reflecting on the findings, Broadstone head of investment consulting, Marc Devereux, emphasised the importance of reviewing hedging levels.

“March demonstrated the benefits of a hedged position, with those schemes that de-risked at the end of 2022 now benefiting from a more stable funding position.

“However, the rapidly changing environment, which the recent market concerns over the banking system have exacerbated, highlights the importance of regular monitoring of hedging positions and funding levels.

"This enables trustees to react quickly, if necessarily, to reposition their strategies and respond to potential opportunities.”

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