The deficit of the FTSE 350 grew by £3bn over July as the overall deficit grew from £29bn to £32bn, Mercer has said.

Despite this, the deficit has more than halved in the first six months of 2018, decreasing by £40m from £72bn at the turn of the year.

Liability values increased from £818bn to £826bn due to “market implied inflation”. Asset values grew by £5bn, from £789bn to £794bn to offset the rise liabilities slightly over the same period.

Mercer senior partner Ali Tayyebi said that while the reduction in the deficit is welcome, pension schemes may not have seen the same improvement on their funding valuations as they use gilt yields, which haven’t risen as much as corporate bond yields since the start of the year.

“Nevertheless, trustees and employers need to continue to ask themselves how much risk they need to take to meet their objectives,” she said.

Mercer strategic adviser Le Roy van Zyl added: “Whilst July saw the deficit remain stable, continued uncertainty over the outcome of the Brexit negotiations means there is a clear need for pension scheme trustees and sponsors to be prepared for the fluctuating circumstances.

“This preparation should focus on scheme finances and risk but also the challenges of making effective decisions against this uncertain backdrop.”

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