The accounting deficit of DB pension schemes for FTSE 350 firms increased by £4bn to £45bn during February, Mercer’s latest Pension Risk Survey has revealed.

The deficit rise was caused by a £5bn increase in liabilities, up to £811bn, while asset values increased slightly, up by £1bn to £766bn.

Mercer partner, Maria Johannessen described the February pension gap increase as “disappointing”.

She continued: “A £1bn increase in asset valuations wasn’t enough to offset a big rise in liabilities driven by an increase in market implied inflation alongside a small fall in corporate bond yields.

“The rising deficit reinforces how important it is for trustees to manage risk and shield themselves from market movements.”

Despite the DB pension deficit growing for FTSE 350 companies, PwC’s Skyval Index revealed that the overall aggregate deficit of UK DB schemes fell by £10bn to £200bn during February.

PwC assessed all DB pension funds, around 5,450, and found that, although liabilities rose by £10bn, this was offset by a £20bn increase in assets.

Commenting on the report, PwC chief actuary, Steven Dicker said: “The funding levels of UK pension schemes have improved slightly over February. Although liabilities increased over the month, positive asset performance helped improve the overall funding level.”

Mercer strategic advisor and partner, LeRoy Van Zyl concluded: “Funding level volatility is set to continue over an important few weeks for British politics, alongside an uncertain global economic environment.

“As the UK edges closer to the Article 50 deadline, it’s important both trustees and scheme sponsors take the time to fully understand the risk they’re running and are prepared to take action to ensure it falls within their risk appetite.”

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