U.K. corporate pension funding deficits increased in July as liability growth outpaced assets, said Mercer and JLT Employee Benefits.
The U.K.'s 350 largest companies saw a 16.8% increase in the total deficit of their defined benefit funds in July to £139 billion ($182 billion), according to Mercer's latest pensions risk survey data. Deficits have more than doubled since the end of 2015.
Liabilities rose 5.3% over the month to a record £856 billion, outpacing a 3.3% increase in assets to £717 billion. The funded status dropped about 1.6 percentage points to 83.8% at the end of July.
“The fall in corporate bond yields over the last two months has now broadly matched the fall in gilt yields. This means that both the measure of deficit used for reporting in company accounts, as well as the deficit figure used by pension scheme trustees as a basis for determining cash contribution requirements are now likely to be considerably higher following the (June 23) Brexit vote,” said Ali Tayyebi, senior partner in Mercer's retirement business, in a news release accompanying the data.
Le Roy van Zyl, senior consultant in Mercer's financial strategy group, added in the release: “In talking to trustees and sponsors over the past month, it is clear that the continued uncertainty following the EU referendum makes it a challenging environment to operate a pension scheme in.”
Mercer's data relate to about half of all U.K. pension fund liabilities.
According to JLT Employee Benefits, the total deficit of all corporate DB plans in the U.K. rose 14.4% in July to a record £390 billion and 52.9% over the year ended July 31. The funded status dropped 2 percentage points over the month and 5 percentage points over the 12 months ended July 31 to 78%.
FTSE 100 company pension funds saw their deficits increase 16.2% over the month and 67.9% over the year ended July 31 to £136 billion as of July 31. The funded status dropped 2 percentage points in July and 6 percentage points year-over-year to 81%.