LGPS surplus reflects resilience amid market turmoil
The latest release of Isio’s Low-Risk Funding Index shows the aggregate funding level for the 87 Local Government Pension Scheme (LGPS) funds in England and Wales reached a record high of 126% as of the official actuarial valuation date, 31 March 2025, up from 125% on 31 December 2024.
Rising Gilt yields and easing inflation reduced liability values over the period, while total LGPS assets remained strong, exceeding £415 billion, resulting in a low-risk surplus of £87 billion. Of the 87 participating funds, 83 reported funding levels of 100% or higher, ranging from 75% to 190%.
At the previous valuation on 31 March 2022, the aggregate low-risk funding position stood at 67%, with no funds reaching full funding on a low-risk basis. While April’s equity market volatility briefly impacted funding levels, Isio’s Index recovered from 117% to 123% by month-end. Asset diversification and rising long-dated gilt yields have contributed to continued financial stability, reinforcing improvements seen since the October 2022 mini-budget.
With funding levels peaking at the 2025 valuation, LGPS funds and participating employers are expected to maintain significantly stronger funding positions compared to 2022. Additionally, the cost of future service benefits has decreased substantially.
Given the ongoing financial challenges facing LGPS employers—including Local Authorities, Universities, Academies, and Housing Associations—the 2025 actuarial valuation offers a timely opportunity to reassess contribution levels and risk exposure, ensuring fund security while delivering value for money.
Steve Simkins, Partner and Public Services Leader at Isio, says: “The funding level peaking at 126% on the 31 March 2025 is excellent news for public sector employers participating in the LGPS. This is especially welcome given the timing aligns with the actuarial valuations.
“There is natural concern around the market volatility, particularly with equities, in April caused by Liberation Day tariffs. Our Low-Risk Index suggests that the LGPS funding level dropped to 117% at its April low point but then returned to 123% at the end of April. Despite the global turmoil, the funding level for the LGPS remained remarkably resilient and the significant surplus that arose following the October 2022 mini-Budget continues to hold well.
“This leaves the LGPS in a surprisingly strong position for the 2025 actuarial valuation –stable in the short-term despite the volatility, and very well-funded over the long-term.
“We expect this to result in positive outcomes for employers on the whole, but there is a risk that some funds and their advisers may take an overly cautious approach. We encourage participating employers to proactively engage with their funds on an informed basis to make a clear case for lower contributions and lower risk exposure, depending on the needs of their organisation.”
