The aggregate defined benefit pension fund accounting deficit for FTSE 350 companies increased 2% in May from the end of April to £113 billion ($189.8 billion), according to Mercer.
The increase in the deficit occurred because of a fall in corporate bond yields, despite a rise in asset values, Mercer said. The funding ratio of 84% remained unchanged over the month.
Asset values increased 1.4% to £583 billion, while liabilities increased 1.5%.
That compares with the end of 2013 when deficits were almost 18% lower at £96 billion.
“The experience over the month of May has been an unfortunate repeat of April in many respects,” said Ali Tayyebi, senior partner in Mercer's retirement business.
Mr. Tayyebi said increased asset values were “outpaced by a larger increase in liability values,” which pushed up the overall deficit. “The widening gap between the asset and liability values also means that the asset base now has to work that much harder in relative terms to the liabilities for the deficit to stand still or improve.”
Adrian Hartshorn, senior partner in Mercer's financial strategy group, added that, despite average funding levels remaining around the 85% mark, which is hiding a wider dispersion of individual results for FTSE 350 companies, Some organizations have seen significant increases in their funding levels, for example where interest rates have been hedged or where there is significant exposure to corporate bond spreads. Improvements in funding levels are allowing some sponsors to implement risk transfer exercises to permanently eliminate pension risk from their balance sheet,” Mr. Hartshorn said.
The data cover about 50% of all U.K. corporate pension fund liabilities.