The aggregate deficit of the defined benefit plans of the U.K.'s largest 350 firms almost doubled over the year ended Dec. 31 to £107 billion ($162.2 billion), said a Mercer report.
The consultant's Pensions Risk Survey showed that, on an accounting basis, the combined deficit of FTSE 350 companies increased 91.1% compared with figures at Dec. 31, 2013, and increased 9.2% in December.
Funding ratios decreased to 85% as of Dec. 31, compared with 90.9% as of Dec. 31, 2013, and 86% at the end of November.
Asset values increased 8.4% over the year to £608 billion and increased 0.3% for the month. Liabilities increased 15.9% to £715 billion over the year and 1.6% in December.
Mercer said in a statement that historic lows in corporate and government bond yields in the second half of 2014 led to a sharp increase in deficits.
“A huge variety of global financial and economic factors affected yields in 2014, and we anticipate continued volatility in 2015,” said Ali Tayyebi, senior partner in Mercer's retirement business, in the statement. “Whilst the recent fall in yields may cause many pension schemes to review the hedging of their interest rates, schemes should be open to the opportunities that volatility provides. Companies and trustees should be prepared.”
