Fully hedged scheme funding rose by 0.2 percentage points to 68.9 per cent in the face of a 0.5 per cent decrease in long-term gilts in December, according to Broadstone’s Sirius Index.

However, despite the funding level improvement, the model fully hedged scheme deficit rose by £0.5m following respective increases in assets and liabilities.

Broadstone stated that the benefits of hedging were increasingly beginning to emerge and could become more evident moving into 2024.

Its Sirius Index monitors how various pension scheme strategies were performing on their journeys to self-sufficiency.

The model half-hedged scheme was not able to hold its funding position in December as liabilities rose at a faster rate than assets, Broadstone noted.

This resulted in a funding reduction of 2.2 percentage points to 96.1 per cent and an increase in deficit of £0.7m.

Despite the movements, Broadstone stated that funding had generally held steady over 2023 as stability returned to the market.

"November and particularly December marked a return of falling rates after sharper than expected falls in inflation and the growing expectation that the Bank of England will reduce the base rate,” explained Broadstone head of trustee services, Chris Rice.

“In this context, the fully hedged scheme unsurprisingly held its position and it indicates that the benefits of hedging could become increasingly evident moving into 2024.

“The model half-hedged scheme managed to fall just short of full funding on the self-sufficiency basis during 2023.

“Yet with the deficit now back over £1m it goes to show the importance of monitoring schemes’ funding levels and de-risking when opportunities present themselves.

“As we enter the new year, trustees should take the time to check their investment strategies are on the right path with potential financial volatility to come as a consequence of recessionary fears and the General Election.”

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