As the Scottish Homes Pension Fund is relatively mature, it uses the proceeds of gilt coupons and redemptions to pay pensions. Cash or cash equivalents are held to enable pensions to be paid between the dates when gilts redeem. Being fully funded, the Fund typically invests excess cash in short-dated bills and gilts. The cash balance at end March 2025 was equivalent to slightly more than seventeen months’ pension payments.
The Fund's assets have declined over the year, from £117.6m to £111m, whilst paying out £7.2m for pensions over the year.
The Fund's last triennial valuation was dated 31 March 2023, at which point the actuary estimated Scottish Homes Pension Fund’s funding level to be 127.3%. The fund had, therefore, achieved its full funding objective ahead of the target originally agreed by the Scottish Government and the City of Edinburgh Council.
As the fund is closed to new entrants and relatively mature, it’s in a position to minimise the investment shortfall risk of assets relative to liabilities in line with Scottish Government guidance. The Pensions Committee reaffirmed the following objective in June 2024: "To match the cash flow from gilt income and redemption payments as closely as possible with the expected liability payments of the fund."
There was no change to the Fund’s strategic allocation of 100% to bonds in the year to 31 March 2025. The Fund invests solely in cash and bonds, specifically UK gilts, which move broadly in line with liability values.