Indexes from both Mercer and PwC have revealed that the deficits of UK defined benefit pension schemes increased during May.

PwC’s Skyval Index found that the UK’s defined benefit deficit rose by £60bn to £240bn during May, while Mercer's monthly analysis revealed that the DB pension scheme deficit of companies in the FTSE350 increased by £5bn to £57bn during the same period.

In PwC's latest monthly update, the assets of the UK’s 5,450 DB pension schemes remained at £1,660bn, however liabilities were recorded at £1,900bn, a £60bn increase on the £1,840bn total at the end of April.

The survey, which delivers monthly updates on the health of the UK’s defined benefit landscape, are based on publicly available data, including the Pension Protection Fund’s dataset.

PwC chief actuary, Steven Dicker, said that the deficit increase was “largely driven by a fall in the yields on government bonds while assets have stayed flat”.

He added: “This further illustrates how continuing economic uncertainty, particularly surrounding the future direction of long-term interest rates, leads to unhelpful volatility in pension funding levels on this measure.”

The rise follows a £80bn decrease in the deficit of UK DB schemes during April, when the deficit stood at £180bn.

Mercer's Pensions Risk Survey showed that liability values increased by £11bn £856bn due a 0.14 per cent fall in corporate bond yields. It said that This was partially offset by a 0.08 per cent decline in market implied inflation since April.

It also found that assets values increased by £6bn, from £793bn to £799bn.

Commenting, Mercer partner, Maria Johannessen, said: “The FTSE350 pension deficit continues to hover around the mid-£50bn range with no significant change over the past three months. We saw a more positive trend with regards to inflation which declined by 0.08 per cent in May, but the effect of this was mitigated by a 0.14 per cent fall in corporate bond yields.”

Mercer actuary, Charles Cowling, added: “Recent political developments in the UK and global economic uncertainty means that scheme trustees and sponsors must prioritise risk management. With Brexit uncertainty reaching a new high following Theresa May’s resignation, we expect volatility to persist for the foreseeable future.”

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