The accounting deficit of defined benefit (DB) pension schemes for the UK’s 350 largest listed companies climbed by £10bn over the course of November.

Mercer’s latest Pensions Risk Survey confirmed the deficit stood at £104bn at the end of the month, rising from £94bn at the end of October.

According to Mercer, the increase was driven by a £31bn increase in liabilities from £931bn at 29 October 2021, to £962bn at the end of November, caused by a fall in corporate bond yields and an increase in market expectations of inflation. Asset values climbed to £858bn compared to £837bn at the end of October.

Mercer’s Pensions Risk Survey data relates to around 50% of all UK pension scheme liabilities, with analysis focused on pension deficits calculated using the approach that companies adopt for their corporate accounts. The data underlying the survey is refreshed as companies report their year-end accounts.

“The impact on markets of the new Omicron variant served to highlight that the pandemic is not yet over,” commented Mercer UK wealth trustee leader, Tess Page. “Alongside this fresh uncertainty, inflation remains a hot topic with significant increases observed and potentially more to come.

“Whilst some inflation drivers such as supply chain issues and reopening price pressures are arguably ‘temporary’, others may be longer term.  As a pandemic-fatigued nation heads towards the Christmas break, this was a month in which unhedged assets again failed to keep pace with liabilities – risk management should be high on the agenda for all schemes in 2022.”

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