The accounting deficit of defined benefit (DB) pension schemes for the UK’s 350 largest listed companies reached £66bn at the end of January, new data from Mercer has revealed.

Mercer’s latest Pensions Risk Survey showed that January’s figure was down from the £70bn reported at the end of December 2020.

The data also revealed that liability values fell from £914bn at 31 December 2020 to £889bn at the end of January, which Mercer suggested was driven by an increase in corporate bond yields. Asset values were £823bn having fallen from £844bn at the end of December.

Mercer’s data for its Pensions Risk Survey relates to around 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.

“Markets are holding up well, despite another very challenging lockdown causing chaos for British industry,” Mercer chief actuary, Charles Cowling, commented. “Retailers also suffered their worst annual sales performance on record in 2020.

“The UK is heading into its second ever double dip recession, although the Bank of England warns that the UK economy is facing its ‘darkest hour’, surprisingly, we have seen positive news on pension funding.

“There are still potential storm clouds looming for pension schemes however. Firstly, in an attempt to boost the COVID-ravaged economy, the Bank of England Monetary Policy Committee raised the possibility of negative interest rates for the first time in UK history. Negative rates would not be good news for pension schemes who are already struggling with increasing liabilities caused by record low rates.”

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