Defined benefit pension deficits continued to grow in January despite the UK’s best monthly stock market performance, according to figures by Towers Watson.

The consultancy estimated that the combined pension deficits of FTSE100 companies stood at £38bn at the end of January, up from £35 bn at the end of December.

While assets grew by almost £15bn during January – helped by 6.4 per cent returns on UK equities – liabilities rose by almost £18bn over the same period.

Aggregate assets in FTSE100 companies' pension schemes were estimated to be £519bn at the end of last month, compared with liabilities of £557bn. The FTSE All Share Total Return Index increased by 6.4 per cent during January 2013.

Towers Watson head of UK pensions John Ball said: “Companies began the year expecting that the retail price index (RPI) would be changed in a way that would reduce future payouts from final salary pension schemes. They had a rude awakening on 10 January when the National Statistician announced that this would not happen after all. FTSE100 companies’ pension deficits increased by about £20bn that day.

“Because the markets were expecting a change to RPI, these savings were banked in the annual accounts for 2012 that companies will publish shortly. Unpicking the expected RPI saving leaves pension deficits bigger at the end of January than at the beginning, when they would otherwise have fallen significantly.”

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