UK corporate pension deficits have risen by £60bn in March from £551bn to £611bn, latest figures from Xafinity have shown.

Despite scheme assets values rising from £1,143bn to £1,176bn over the same period, scheme liabilities in DB corporate pension schemes rose to £1,787bn from £1,694bn as a result of a 0.25 per cent fall in bond yields.

The rise comes after February’s fall in deficits of £70bn as a result of slowing outlooks for price inflation and a strengthening of equity markets.

Xafinity corporate solutions director Hugh Creasy said: “Bond yields were perceived by many as having only one way to go - up. The truth is those yields have fallen again in the last few weeks. What is often overlooked is that bond asset values and actuaries’ calculations do indeed build in an expectation that yields will rise. For example, gilt yields at the beginning of March, just as the end of March, projected a borrowing cost of 4% in 10 years’ time, a substantial increase on current base rates.

“The important question is not “will yields rise?”, but “will borrowing costs – the key driver for bond yields - increase faster or slower than is priced in today?” March has seen a dip in the speed at which base rates are projected to climb to that 4 per cent and that is where today’s pain has come from.”

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