Multinational support services and construction company, Interserve, has seen its pension position swing from a £34.3m surplus to a £25.5m deficit due to a sharp fall in gilt yields.

In its latest interim management report, Interserve said the swing was also due to the associated reduction in liability discount rates following the EU referendum.

In a statement the company said: “Although the scheme’s position has weakened over the last year, the work we have done in recent years to de-risk the scheme’s liability position (the 2014 pension buy-in and making a one-off contribution of £55m of PFI assets in 2013) has left the scheme in a much stronger than it would have been in without these actions.”

The combined deficit of UK defined benefit (DB) pension schemes has hit £950bn for the first time ever. This is off the back of further drops in yields as the Bank of England attempts to roll out its package of Quantitative Easing.

“It’s doesn’t come as a surprise that pension schemes are being hit hard, but the pain won’t be felt equally by all. The difference between those that had hedged and those that hadn’t will be marked. Many schemes with robust funding plans will be able to weather this. But some will be feeling the pain acutely, and there could be more to come,” Hymans Robertson partner Patrick Bloomfield said.

“That’s because above target inflation will flow through to higher pension indexation, putting yet more pressure on scheme finances and cashflow. Those who’ve planned ahead will weather the storm, but those who haven’t could become forced sellers of assets at just the wrong point in the economic cycle.

“While pensions are long-term, the past months’ events highlight the need for schemes to become more resilient to risk. Specifically, they need to ensure they don’t take more risk than they need to. They also need to place much closer attention to assessing the financial ability of their sponsoring company to support the scheme now and in the future.”

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