The defined benefit pension deficit for FTSE 350 schemes has jumped from £63bn to £96bn in the past two weeks, according to Hymans Robertson.

The 50 per cent increase takes the pension deficit to funding levels seen in summer last year. Hymans Robertson head of corporate consulting Rob Hatchett commented that equity market falls and a drop in gilt yields over the past month had a “detrimental impact” on pension scheme funding.

“A typical scheme will have seen their funding level drop by around 5 and 10 per cent since the beginning of September. The collective FTSE 350, despite paying in cash contributions of circa £15bn in the last year, has ended up in a worse position than it was 12 months ago,” he added.

Hatchett explained the impact of bond yields on liabilities had a greater effect than recent equity market falls, however “both have contributed to the overall worsening”.

Equity markets had a difficult September and early October with the FTSE 100 index down from a high of nearly 6900 to around 6200 in the last few days, a fall of around 11 per cent. This has been coupled with a fall in gilt yields over the last month of around 0.3 per cent.

Hatchett added: “This highlights the need for companies to take a slow and steady approach to funding pensions, with limited exposure to investment risk.” He does not recommend any knee-jerk reactions as the short-term outlook remains unclear and markets can often overshoot.

“Pension scheme funding is a long-term process and the recent falls will not necessarily have knocked the scheme off the long-term track. However, the greatest concern will likely be for companies who have schemes nearing a valuation” he added.

The likely cause of the market volatility can be pinpointed to the global economic slowdown, regional conflicts, Ebola and political instability, said Hymans Robertson.

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