The aggregate deficit of DB schemes in the PPF 7800 Index increased by £46.2bn over December, the Pension Protection Fund has revealed.

At the end of December 2018, the deficit stood at £31.9bn, compared to a surplus of £14.3bn at the end of November 2018. The position has improved from a year ago, when a deficit of £103.8bn was recorded at the end of December 2017.

The funding level of schemes decreased over this month from 100.9 per cent to 98 per cent at the end of December 2018. The funding level is higher than the 93.9 per cent recorded in December 2017.

Within the index, total scheme assets amounted to £1,571.3bn at the end of December 2018. Total scheme assets decreased by 0.6 per cent over the month and increased by 1.1 per cent over the year.

Total scheme liabilities were £1,603.2bn at the end of December 2018, an increase of 2.4 per cent over the month and an increase of 5.3 per cent over the year.

The aggregate deficit of all schemes in deficit at the end of December 2018 is estimated to have increased to £166.4bn from £137.6bn at the end of November 2018. At the end of December 2017, the equivalent figure was £210bn.

At the end of December 2018, the total surplus of schemes in surplus decreased to £134.6bn from £151.9bn at the end of November 2018. At the end of December 2017, the total surplus of all schemes in surplus stood at £106.3bn.

The number of schemes in deficit at the end of December 2018 increased to 3,271, representing 60 per cent of the total 5,450 defined benefit schemes. There were 3,008 schemes in deficit at the end of November 2018 (55.2 per cent) and 3,710 schemes in deficit at the end of December 2017 (66.4 per cent).

The number of schemes in surplus decreased to 2,179 at the end of December 2018 (40 per cent of schemes) from 2,442 at the end of November 2018 (44.8 per cent). There were 1,878 schemes in surplus at the end of December 2017 (33.6 per cent).

Commenting, BlackRock head of UK strategic clients, Andy Tunningley, said: “December was another reminder that UK schemes should be wary of playing the long-game of waiting for rates to rise in order to boost funding levels.

“With no further clarity on Brexit, we believe the Bank of England will keep base rates on hold until after the UK’s scheduled departure from the EU.

“Assuming a no-deal scenario is avoided, we expect markets to price in further tightening, with one rate hike in 2019 and another in 2020. In the absence of further political or economic shocks, positive or negative, it is hard to see other outcomes and these are already priced in to the yield curve.

“Those trustees waiting for rates to rise faster than the market will need the patience of a saint.

“Our message to trustees as we start the New Year: look at your scheme holistically, build resilience into your strategy and diversify your growth assets to ensure your scheme is in good shape for what looks set to be a bumpy ride.”

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