The accounting deficit of defined benefit pension schemes for the UK’s 350 largest listed companies increased by £5bn to £34bn between the end of June and the end of September, according to Mercer’s latest data.
Mercer’s Pensions Risk Survey found that the rise was driven by a £2bn fall in asset values, to £787bn, and a £3bn increase in liabilities, to £821bn, over the same period.
Mercer DB strategist and partner, LeRoy van Zyl said: “We continue to see significant levels of activity, with trustees and sponsors taking action to reduce risk and lock in financial gains.
“With uncertainty set to continue in the run-up to the UK’s departure from the EU early next year, trustees, in particular, should consider the potential impact on their sponsor’s financial security and how that could impact on their overall risk management plans.”
Despite movements in asset and liability values, the funding level remained the same throughout September.
During September, liabilities decreased by £8bn due to an increase in corporate bond yields, partially offset by an increase in market implied inflation. However, asset values also fell by the same amount from their position at the end of August.
Mercer head of DB solutions development and partner, Alan Baker added: “Despite stability in the overall funding gap in September, we saw significant swings in asset and liability values.
“Market volatility is putting recent improvements in the funding deficit at risk and trustees and sponsors should act now to assess the risk they are running and ensure they have plans in place to protect them from any future downside.”