The total deficit for defined benefit funds of the FTSE 350 companies increased 17.3% to £95 billion ($147.5 billion) over the month ended July 31, driven by a fall in corporate bond yields, Mercer said.
The consultant’s pensions risk survey data of the 350 largest companies in the U.K. showed that a fall in market-implied inflation and an increase in assets were not enough to offset a rise in liabilities.
Asset values increased 1.4% to £633 billion as of July 31, but liabilities reached their highest point last month, increasing 3.3% to £728 billion.
The FTSE 100 returned about 2.5% in July, said Ali Tayyebi, senior partner in Mercer’s retirement business, in a statement accompanying the consultant’s latest data.
“This might have given hope for a continued improvement in the funding position over the month of July,” Mr. Tayyebi said. “However, a relatively small reduction in yields available on long-dated corporate bonds has meant that the deficit has in fact increased quite substantially over the month.”
Mr. Tayyebi added that it is particularly concerning that deficits are closer to the last monthly high of January 2015, when deficits hit £133 billion, “despite corporate bond yields being nearly 65 basis points higher than they were at that time.”
