The deficits of all UK private sector DB pension schemes fell from £143bn to £117bn in the year to 28 February 2013 and funding levels increased from 88 per cent to 91 per cent according to JLT Pension Capital Strategies (PCS).

The value of assets increased from £1,038bn to £1,142bn, while liabilitiesrose from £1,181bn to £1,259bn.

JLT Pension Capital Strategies managing director Charles Cowling said: “The UK’s pension schemes seem to have emerged relatively unscathed from the recent downgrade of the UK’s credit rating.

“This is, however, likely to be short-lived as there are a number of pitfalls looming that have the potential to unnerve plan sponsors. The ending of contracting out is set to increase the cost of maintaining scheme benefit levels for those schemes still open to accrual, and the continuing austerity measures and the on-going quantitative easing are ensuring bond yields remain low and liabilities high, applying continued pressure to pension schemes.”

Cowling added that “looming inflationary rises” would also increase liability values and Solvency II requirements would increase the costs of scheme buyouts.

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