The accounting deficit of defined benefit (DB) pension schemes for the UK’s 350 largest listed companies saw an increase of £4bn over the course of January, new figures published by Mercer have revealed.

Mercer’s latest Pensions Risk Survey showed that the deficit stood at £80bn at the end of the month, having risen from £76bn at the end of December.

New figures also confirmed that liabilities fell from £913bn at the end of December to £879bn as of 31 January, caused by a rise in corporate bond yields offset by an increase in market expectations of inflation. However, asset values fell further to £799bn compared to £837bn at the end of December, which Mercer suggested had led to the increase in deficits.

Mercer UK Wealth Trustee Leader, Tess Page, said: “The cost of living may be failing to cut through politically amid the Downing Street Party rows, but inflation is certainly giving pension schemes food for thought in 2022. Investment markets also took a bit of a hit during January, with global equity prices falling back.”

Data used for the monthly Pensions Risk Survey from Mercer 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.

Page added: “Trustees and scheme sponsors are looking ahead to a busy year in pensions, with the new code of practice and climate change reporting on the horizon, alongside cracking GMP equalisation and preparing for pensions dashboards. Those schemes that have already tackled their key risks around investments, inflation, and interest rates will be best-placed to navigate 2022.”

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