Bank of England holds interest rates at 3.75%

Bank of England holds interest rates at 3.75%

19 Mar 2026

Adam Gillespie, Partner, XPS Group, commented: "Today's announcement will only have a minimal impact on Defined Benefit (DB) pension schemes because funding positions are driven primarily by long-term gilt yields rather than the Bank Rate itself. In reality, long-term UK interest rate and inflation expectations have already shifted materially higher this month. The gilt market has not been waiting for Threadneedle Street. Most schemes are well insulated from today’s decision with aggregate DB surpluses still well above £200bn - a wall of financial resilience built up over several years of elevated yields.

In this high funding, high-rate environment, there are two clear priorities for trustees and sponsors right now.

In the short term, without regular recalibration, schemes risk their liability hedges slipping out of alignment and their hard-earned financial buffers being eroded. As well as recent upticks in rates and inflation, structural shifts in the gilt market are creating headwinds for schemes' protection strategies. Further gilt market volatility is to be expected with demand falling from the gilt market's most reliable customer, and the United Kingdom Debt Management Office changing supply. Today is another reminder for trustees and sponsors to keep their hedging strategies under active review and consider ways to strengthen their resilience to an uncertain future.

In the longer term, trustee and sponsor focus should be on making the most of healthy surplus positions. With the Pension Schemes Bill progressing through Parliament and surplus access regulations expected later this year, the current financial environment offers real opportunities to benefit members, trustees and sponsors."