LGPS (England & Wales) Low-Risk Funding Index: 30 September 2025 results

Executive summary

• As at 30 September 2025, the estimated aggregate funding level for the LGPS (E&W) was 147% funded on a low-risk basis
• The aggregate funding level was 67% at 31 March 2022 and has remained at significantly higher levels since 31 May 2023
• The improvement in funding level is largely due to the significant increase in UK Government bond yields and improvements to asset values

Introduction

This update sets out the latest low-risk funding position for the LGPS (E&W).

The estimate has been carried out as at 30 September 2025 and assumes a ‘low-risk’ funding basis for the liabilities, i.e. the basis that would apply if assets were fully invested in liquid, low-risk investments, such as government bonds.

The aggregate funding position has been calculated by combining the individual results for each of the 87 pension funds participating within the LGPS (E&W). Please note that within this release we have not shared our estimates of the fund specific results, this information will be shared once more accurate data becomes available.

Please note that the numerical information set out within the update has been calculated using approximate methods, based on information available within the public domain (not necessarily the most recent), and has been provided for information purposes only. Note that in line with the previous release, we have made allowance for updated asset and cashflow data produced by the Ministry for Housing, Communities and Local government (MHCLG) as at 31 March 2024, further information is available in the Appendix linked below.

The information set out within this update should not be considered as advice or be relied upon in making any financial decisions. Further information is detailed in the Appendix linked below.

Background and purpose

Market conditions for pension schemes have improved significantly since the most recent LGPS (E&W) actuarial valuations were carried out as at 31 March 2022. The value of liabilities assessed with reference to gilt yields has fallen dramatically. This has led to material improvements in funding levels for funds and their employers, and indicates that funds should:

• Consider their funding and investment objectives in light of significantly improved funding levels (these may differ when levels are approaching or exceeding 100%)
• Actively review investment strategies, specifically considering whether de-risking opportunities should be taken advantage of
• Consider whether certified employer contributions should be reduced before 1 April 2026 to avoid overfunding
• Recognise the differing needs of their employer base and enable their participating employers to agree funding and investment arrangements that reduce current contribution rates and/or ongoing risk exposure

The purpose of providing this update is to:

• Highlight the very significant funding improvements experienced since 31 March 2022  
• Provide an update to track the evolving funding position and the impact of changes in market conditions since the launch of the Index and later reference points
• Monitor funds’ responses to these improved funding positions, considering investment strategy and employer engagement

Current market conditions are very good news for the LGPS and present an immediate opportunity to enhance long-term sustainability for funds and their employers.

Changes since previous release as at 31 March 2025

• Since 31 March 2025, the estimated aggregate funding level for the LGPS (E&W) has increased from 126% to 147%
• The improvement in the funding level is due to improvements in UK Government bond yields and lower future inflation expectations, both of which reduce the value of liabilities. Asset values have also increased over the period
• 86 of the 87 funds have funding levels greater than 100%
• A comparison of the estimated aggregate asset and liability values as at 31 March 2025 and 30 September 2025 is set out in the chart below:

Aggregate results

We show below the change in funding level over the period from 31 March 2022 to 30 September 2025 for the LGPS (E&W) in aggregate.

• The funding level for the LGPS (E&W) in aggregate as at 31 March 2022 was approximately 67% when calculating liabilities on a low-risk basis
• Over the period to 30 September 2025, the aggregate funding level has increased to 147%
• Significant volatility was experienced in September 2022 due to the release of the UK Government’s Mini-budget
• Since the Mini-budget, the aggregate funding level has remained consistently higher than as at 31 March 2022 (an average of 110%), allowing funds to reasonably consider the four points listed at the top of this update

Next steps

Overall, based on the sustained improvement in funding levels, we would expect to see funds consider:

• Shifting to lower risk investment strategies, for example through increased exposure to gilts and bonds;
• Reviewing current employer contribution rates, in particular, whether it might be appropriate to reduce current rates; and
• Offering de-risking opportunities and other flexibilities to employers

Engagement with funds

This update has been prepared using information available within the public domain (not necessarily the most recent) and our calculations are estimate in nature (see the Appendix for further information).

If you are a participating LGPS (E&W) fund and would like to speak to an Isio representative to discuss the information set out within this update or to provide more accurate and up-to-date information, please contact: steve.simkins@isio.com