Defined benefit (DB) pension schemes are “ready to derisk” following recent funding improvements, according to the Broadstone Sirius Index, with both half- and fully hedged pension schemes finishing 2024 in better funding positions than they started.

The Broadstone Sirius Index, which monitors how various pension scheme strategies are performing on their journeys to self-sufficiency, revealed that funding levels for the 50 per cent hedged scheme increased from 101.4 per cent to 103.4 per cent in December, with a £0.5m increase in its surplus to £0.9m.

This marked a "significant" improvement since the start of the year when the scheme had a £1.2m deficit and a 96.1 per cent funding level.

Broadstone noted that the scheme has now also reached full self-sufficient funding and will therefore be able to explore an insurance transaction to secure the benefits of its members or the possibility of running on.

Meanwhile, the fully hedged scheme remained stable throughout December and 2024, and whilst the funding level decreased slightly in the year's final month from 69.5 per cent to 69.4 per cent, the scheme’s deficit was reduced by £0.3m to £8.1m.

This again marked an improvement since the start of 2024, when the fully-hedged funding level was 68.9 per cent, and the deficit was £8.5m.

Commenting on the findings, Broadstone head of trustee services, Chris Rice, said: "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.

"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."

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