Half-hedged defined benefit (DB) pension scheme funding levels reached a record high of 99.7 per cent near the end of May, as continued funding improvements pushed the scheme closer towards full funding, Broadstone’s Sirius Index has revealed.

The index, which monitors how various pension scheme strategies are performing on their journey to self-sufficiency, found that the half-hedged scheme posted "notable gains" on a month-to-month basis, rising from 98.3 per cent to 99.0 per cent.

According to Broadstone, this was due to a slight reduction in yields, which saw liabilities and hedging assets rise.

The fully hedged scheme also saw continued funding improvements, as the funding level rose from 67.5 per cent to 68.2 per cent.

Commenting on the findings, Broadstone head of trustee services, Chris Rice, said: "Both of our example schemes improved their funding positions in May following a reduction in yields which drove liabilities and assets higher.’

“It is also encouraging to note that both schemes’ funding levels have remained relatively stable for over a year now, and we would expect that the majority of defined benefit schemes have adapted to their new funding positions and adjusted their long-term investment and funding strategies accordingly."

Given the continued funding improvements, Rice suggested that it also looks likely that the next government will inherit a stable DB pension scheme funding environment.

“This will help it consider and develop long-term policy regarding well-funded schemes that are targeting buyout in a hot insurance market, the emerging consolidation options and/or run on as well as those schemes where there is still work to do," he continued.

“This will allow trustees to work with employers to set realistic and affordable medium to long-term strategies.”

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