Hedged pension schemes strengthen as gilt yields fall, Broadstone index shows

Fully hedged pension schemes improved their funding position in February as gilt yields declined, according to the latest update from the Broadstone Sirius Index.

The index, which tracks how different defined benefit pension strategies are progressing toward self-sufficiency, found that fully hedged schemes outperformed partially hedged strategies during the month.

Funding levels for fully hedged schemes rose by 1.1%, increasing from 71.8% at the end of January to 72.9% by the end of February – the strongest position recorded since September 2022.

By contrast, schemes with 50% hedging saw a slight decline in funding levels, falling from 108.9% to 108.7% over the same period, although still broadly in line with levels seen earlier in the year.

Chris Rice, head of trustee services at Broadstone, said: “Many defined benefit schemes are in a strong position following increasingly hedged strategies and positive returns on growth assets over the last year or two.

“The instability in the Middle East casts a shadow over investment strategies and outcomes presently.

“The turbulence has the potential to being a roller coaster ride on financial markets, so schemes and their trustees should make sure they have their investments well managed to protect their funding positions.”