The total deficit of U.K. corporate pension funds increased 8.7% in the month, but fell 41.5% over the year ended Aug. 31, to £199 billion ($257 billion).
Consultant JLT Employee Benefits' latest update showed the funded level of these funds fell to 89% from 90% as of July 31, but improved from 82% as of Aug. 31, 2016.
For the month, asset growth of 2.3% to £1.61 trillion was more than offset by a 3% increase in liabilities, to £1.81 trillion. Assets grew 3.8% for the year ended Aug. 31 and liabilities fell by 4.3%.
Deficits at the 100 largest U.K. companies increased 12.2% in August to £55 billion, but fell 50.9% over the year ended Aug. 31. The funding level was 93%, flat for the month but improving from 85% a year earlier.
FTSE 350 company deficits increased 11.5% in August and fell 48.5% over the year ended Aug. 31, to £68 billion. The funding level was 92%, compared with 93% as of July 31 and 85% as of Aug. 31, 2016.
"Markets have been treading water against an ever-challenging political backdrop this month," said Charles Cowling, director at JLT Employee Benefits, in a statement accompanying the update. "As a result, IAS19 pension deficits, the deficit that is recorded in a company's accounts, have drifted higher but these are still below levels seen last year."
Mr. Cowling warned these figures "hide some pretty major problems." With inflation drifting higher, pension fund liabilities "look ever more challenging for some."
He added that companies carrying out their three-yearly actuarial valuations "are likely to see significant increases in funding deficits and hence considerable demands for cash contributions." He also highlighted the impact of potential changes to accounting calculations under consideration by the International Accounting Standards Board. "This may appear a minor technical amendment to a part of the (accounting standard used for employee benefits) but it could result in tens of billions of pounds of additional liabilities being added to the balance sheets of U.K. companies," said Mr. Cowling.
Separate figures from PricewaterhouseCooper placed the total deficit of the U.K.'s about 5,800 corporate funds at £460 billion on a funding basis, up 9.5% over the month. The funding basis is the target used by pension fund trustees to determine company cash contributions, said PwC.
Assets were calculated at £1.57 trillion by the firm's Skyval index, which is based on a platform used by pension funds. However, PwC said liability was £2 trillion. Calculations show the funded status was 77.3% at the end of August, compared with 78.7% a month earlier.