The total deficit of U.K. corporate pension funds covered by the Pension Protection Fund's 7800 index increased 6.4% for the month, and 72.5% for the year ended July 31, to £408 billion ($539.5 billion), as increased assets were not enough to offset growing liabilities.
The funded status of the 5,945 pension funds in the index fell to 77.4% from 78% as of June 30, and from 84.1% at July 31, 2015.
Liabilities increased 3.5% over the month, and 21.6% over the year, to total £1.809 trillion. Conventional 15-year gilt yields dropped 24 basis points in July, said the PPF in its 7800 index update, while index-linked 15-year gilt yields fell 3 basis points. For the year ended July 31, 15-year gilt yields fell 106 basis points, and index-linked 15-year gilt yields were down 52 basis points. The PPF uses the annualized yield on the FTSE U.K. gilts 15-year fixed-interest index, and the index-linked equivalent, for its analysis.
Assets also grew, by 2.8% for the month, and by 12% for the year, to £1.401 trillion as of July 31. The FTSE All-Share index returned 3.9% in July, but was little changed over the year, said the PPF update.
The proportion of pension funds covered by the index that were in deficit as of July 31 increased to 84.4% from 84% as of June 30, and from 79.1% as of July 31, 2015.
Separate data from consultant Mercer's Pensions Risk Survey show that the accounting deficit of the U.K.'s 350 largest listed company pension funds grew £10 billion in five days, to total £149 billion on Aug. 4, compared with £139 billion at the end of July. This followed a decision by Bank of England's Monetary Policy Committee to cut interest rates to 0.25%, from 0.5% on Aug. 4.
Mercer's data relate to about 50% of all U.K. pension fund liabilities.