For the first time, the low risk funding level of Local Government Pension Scheme funds in England and Wales has reached 147%, up from 126% at the March valuation date, according to Isio. The post-valuation improvements should be factored in when setting contribution levels, the consultancy suggested. 

Isio’s Low-Risk Funding Index suggests the LGPS funding level improved from 126% to 147% over the six months to 30 September 2025, with a low-risk surplus of £147bn as total LGPS assets now top £450bn for the first time. At the last valuation in 2022, the aggregate funding level was 67%.

All funds, with the exception of the closed Environment Agency Pension Fund, are now fully funded for the first time, the consultancy said. Funding levels range from 101% to 226%. Isio attributes recent funding gains to higher gilt yields – used to discount liabilities – as well as lower future inflation expectations and increases in asset values.

Funds should revisit decisions taken early in the valuation process, the consultancy suggested, to take into account post-valuation improvements, saying the 2025 actuarial valuation provides an opportunity to ‘reset’ contribution levels.

“It is normal practice to take into account post-valuation experience.  We would encourage funds to take these improvements into account to support a positive approach to the 31 March 2025 valuation. Where decisions have been taken early on in the valuation process, these may need to be reconsidered in light of the 30 September 2025 position,” said public services leader at Isio, Steve Simkins.  

As LGPS funds review Funding Strategy Statements and share proposed contribution rates with employers, the healthy funding levels “could enable transformational change for employers in the public sector”, he said.  

The enormous buffers held to meet liabilities within the generally cash-strapped local government sector have alreadly prompted some councils to call for lower or no employer contributions. Earlier this year, the Royal Borough of Kensington & Chelsea decided to reduce its contributions to zero for 2025-26 amid a 207% funding level, using the money to support survivors and bereaved families of the Grenfell Tower fire instead. In the spring, four councils at the Teesside Pension Fund requested a contribution review, and further such requests are likely as the 2025 valuation is finalised.