UK pension deficits fell by £7 billion during the month of February, fuelled by the recent rally in equities, according to Mercer’s Pensions Risk Survey data.

The data, which relates to about 50% of all UK pension scheme liabilities, showed that the estimated pension scheme accounting deficits for FTSE350 companies stood at £68 billion at the end of February, compared to £75 billion at the end of January. This represented the first reduction in deficits month-on-month since September 2012.

Commenting on the figures, Adrian Hartshorn, partner in Mercer’s Financial Strategy Group, said: “Notwithstanding the fall in deficits over February, investment markets and the general economic environment continue to be very challenging.

"However, it is possible to create win-win outcomes for sponsors and trustees by understanding the sponsor covenant and reflecting the value within funding and investment decisions. This may result in alternative, potentially less onerous, funding and investment strategies to be adopted which support the long term growth of the sponsor’s business and the long term health of the scheme.”

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