The scheme liabilities of the 7,400 defined benefit (DB) pension schemes in the Pension Protection Fund's (PPF) eligible universe has topped £1trn for the first time.

Data from the PPF's 7,800 Index shows that an increase of 14.8 per cent over the year to August 2009, including a 5.6 per cent increase over August alone, has pushed liabilities up to £1,009.6bn from £956.4bn in July 2009.

The news is ironically satisfying for independent benefits and investment consultant Hymans Robertson, as it confirms their predictions from early September that the lifeboat fund's liabilities would hit this figure. However, partner Martin Potter explained that these "worrying" figures should not have taken us by surprise, and must be acted on now. "We have been calling on the PPF and the Government to act now to prevent this situation from getting worse as corporate failures continue. The fairest solution would be for the PPF to reduce the rate at which it pays out benefits to a level that will be affordable in the long-term, otherwise the Government will need to step in and underwrite the PPF's commitments."

Further bad news from the Index showed that the aggregate funding position of the DB funds has worsened over August to an estimated deficit of £173.2bn, an increase of £15.1bn from the end of July 2009. Unsurprisingly, this funding level is worse than it was last year, when the deficit stood at £39.3bn.

The total deficit of all schemes in deficit also worsened to £194.6bn from £179.0bn at the end of July 2009, while in August 2008 it was £92.7bn. However, the total surpluses of all schemes has increased from £20.9bn to £21.4bn over the month, although compared to August 2008's value of £53.4bn, this is by no means impressive.

Asset levels also showed a positive move, with a 3.3 per cent increase due to rises in UK and global equities. However, this has been countered by lower gilt yields in general, leading to an increase in liabilities of 5.2 per cent.

Watson Wyatt commented on the aggregate liabilities, which are calculated on a S179 basis, and the increase in asset values, and said this is an important reminder of funding levels' fickle nature.

"This is a reminder that there are two sides of the coin when it comes to pension schemes' funding levels and that deficits can rise even when assets grow strongly," said John Ball, head of defined benefit consulting at Watson Wyatt. "The UK stock market rose by seven per cent in August but the impact of lower bond yields on liabilities means pension funds are having to run on stand still."

Share Story: