UK defined benefit (DB) pension schemes saw a slight deterioration in their funding levels in October, analysis from Broadstone has revealed.

Broadstone’s Sirius Index, which acts as a monitor of how pension scheme strategies are performing on their journeys to self-sufficiency, showed that the half-hedged scheme funding had fallen from 98.2 per cent to 97.6 per cent in October.

The fully hedged scheme also recorded a fall, edging down from 68.4 per cent to 67.2 per cent.

Broadstone explained that while rising interest rate expectations caused liabilities to fall close to the record low reached in 2022 amidst the liability-driven investment (LDI) crisis, reductions in growth assets caused the total value of assets to fall by more than the liabilities.

As a result, the additional exposure to interest rate movements by the fully hedged scheme caused its funding level to deteriorate more than for the half-hedged scheme.

Broadstone head of trustee services, Chris Rice, stated: "Economic concerns caused most asset classes to fall in October, which has unsurprisingly been replicated in the funding levels of our schemes.

“The schemes’ liabilities are now at a level consistent with the position a year ago, which was in the midst of the LDI crisis. Thankfully, the volatility of last year has not been repeated, and both schemes are exhibiting a more stable funding level and deficit value.

“Nevertheless, trustees should continue to review their investment strategy to ensure that any opportunities to reduce volatility are taken up.”

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