The aggregate funding levels for UK pensions has remained unchanged in the last year despite liabilities reaching record highs, according to JLT Pensions Capital Strategies.

The de-risking specialist’s monthly index of UK defined benefit scheme funding positions calculated that the average funding ratio for all UK schemes is 89 per cent, according to the FRS17 accounting standard used in companies’ reports and accounts. The figure for FTSE 100 company schemes was 86 per cent, as it was for the FTSE 350.

JLT Pension Capital Strategies managing director Charles Cowling said: “Bond yields have fallen to new lows pushing pension liabilities to record highs. Over the last year asset returns have been high enough to mitigate this bond yield effect leading to funding levels similar to last year, but higher in absolute terms.”

According to the index, the total value of assets held by UK private sector schemes was £1.164trn at the end of April, up from 1.028trn this time last year. However, liabilities were up from £1.161trn to £1.307trn. As a result schemes’ aggregate deficit was largely unchanged, up £10bn higher to £143bn.

With investors coming out of commodities and into bonds, and with the low levels of bond issuance, there is little cause for optimism that funding levels will improve, according to Cowling.

He said: “Bond yields are expected to remain low due to the uncertainty in Europe and the UK government’s austerity measures and as such the current deficit problems are expected to remain for some time.”

Despite this, there was some hope to be had from the Pensions Regulator’s statement due later this month, which is to reflect the government’s budget announced of a new pension funding principle to encourage growth. That could give sponsors some respite, Cowling added.

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