The accounting deficit of FTSE 350 company pension funds grew to £85 billion ($118 billion) for the month ended July 31, a £13 billion increase from the previous month.
Consultant Mercer's latest Pensions Risk Survey showed assets rose to £843 billion from £814 billion and liabilities increased to £928 billion from £886 billion from the previous month, driven by a fall in corporate bond yields and a small increase in market expectations for future inflation.
"July has been a reminder that funding levels can go down as well as up, and for schemes that have not hedged their risks there remains high volatility," said Tess Page, partner and U.K. wealth trustee leader at Mercer, in a news release. "In recent months some schemes have locked into gains in order to get ahead on their long-term journey plans — trustees and employers should therefore be vigilant to such opportunities and prepare for how they will respond to future upside."
Mercer's Pensions Risk Survey data cover roughly 50% of all U.K. pension fund liabilities and calculate pension deficits with the approach adopted by companies for their corporate accounts. Mercer estimates the aggregate combined funding ratio of plans operated by FTSE 350 companies on a monthly basis, based on projections of reported financial statements.
Data published by The Pensions Regulator and elsewhere tells a similar story, Mercer said in the news release.