The London Pensions Fund Authority (LPFA), one of the UK’s largest local government pension schemes is almost fully funded, it announced today. An initial assessment carried out by actuaries Barnett Waddingham put the funding level of the £4.7bn scheme at 95 per cent, up from a weighted average between active members’ and pensioners’ subsections of 81 per cent at the last valuation, three years ago.

The scheme, covering about 200 employers, attributed the improvement in funding to changes in the asset and liability strategy, and strong investment performance since the last valuation. It has used an active LDI strategy to hedge inflation and interest rate risk since 2006, and in February made a large tactical switch to reduce the interest rate hedge and increase its inflation hedge, crystallising a book profit of some £200m.

LPFA CEO Mike Taylor, said: “We have worked hard in recent months to refine our asset and liability strategy, and are delighted to see that these efforts are already paying dividends.”

The scheme’s funding position also benefited from a switch from final salary to career average earnings benefits due in 2014.

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