The total deficit of U.K. corporate defined benefit funds increased 28.7% to £502 billion ($656.2 billion) over the month ended Aug. 31, said JLT Employee Benefits.
The consultant's latest index tracking corporate pension fund assets, liabilities and deficits showed deficits increased 101.6% over the 12 months ended Aug. 31.
Assets grew 4.2% to £1.45 trillion in August, a 19.1% increase vs. Aug. 31, 2015. However, a jump in liabilities more than offset asset growth. Liabilities increased 9.6% over the month and 33.2% over the 12-month period to total £1.952 trillion.
The funded status of these pension funds fell to 74% as of Aug. 31, vs. 78% as of July 31 and 83% as of Aug. 31, 2015.
FTSE 100 pension fund deficits grew 33.8% over the month and 139.5% over the year ended Aug. 31, totaling £182 billion. The funded status fell to 77%, from 81% as of July 31 and 88% a year previous.
FTSE 350 pension fund deficits also grew, by 32.7% for the month and 135.2% for the year, to £207 billion. The funded status dropped to 77% from 81% a month earlier and 87% as of Aug. 31, 2015.
Separate figures released by PricewaterhouseCoopers showed the total funding deficit of the about 6,000 U.K. DB funds grew 16.4% over the month through Aug. 29, to £710 billion.
Raj Mody, partner and global head of pensions at PwC, said in a telephone interview that trustees need to ensure they understand their own funding position, particularly given the challenging macroeconomic environment. “(The funding measure) should be scheme specific. It is important for pension scheme trustees and the sponsor to understand in plain terms what are the assumptions that underpin their specific deficit measure because that is driving potentially real-life decisions about the cash paid into the pension scheme. I don't think there is enough understanding and transparency in that.”
Mr. Mody said trustees must understand the cash flow profile of their fund — “understand year-by-year what is the pension scheme commitment,” and if that can be alleviated in any way.
Trustees should also revisit their asset strategy, he said. “Is it fit for purpose given the market conditions we are now in? I struggle to believe any asset strategy was designed or created with (these market conditions) of very low long-term yields,” Mr. Mody said.
