The accounting deficit of FTSE 350 companies’ defined benefit (DB) pension schemes fell by £41bn in May to £4bn at the end of the month, according to Mercer’s Pensions Risk Survey data.

Scheme liabilities declined from £784bn at the end of April to £716bn at the end of May, which Mercer said was driven by further increases in corporate bond yields offset by a fall in the market’s view of inflation.

The fall in liabilities was partially offset by a reduction in asset values, which decreased from £739bn to £712bn over the month.

Mercer UK wealth trustee leader Tess Page noted that the continued fall in the deficit presented a “real opportunity” for schemes and sponsors to de-risk.

“The aggregate funding position continues to improve, and again the main driver was bond yields, with the market’s long-term view of inflation not currently reflecting the immediate price increases consumers are feeling,” she commented.

“These improvements in funding will help support company balance sheets if conditions hold until their year-end, and we expect a similar result when looking at trustees’ assessment of their schemes.

“These improvements represent a real opportunity for trustees and employers to lock in funding gains and take risk off the table. Given the current levels of economic and political uncertainty this will be seen by many as a good thing.”

Mercer’s Pensions Risk Survey data relates to approximately 50% of all UK pension scheme liabilities, with analysis focused on pension deficits calculated using the approach companies have to adopt for their corporate accounts.

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