The total deficit of U.K. defined benefit funds covered by the Pension Protection Fund's 7800 index increased 66.8% in February to £124.6 billion ($160.1 billion), from a deficit of £74.7 billion at the end of January.
Deficits also increased over the year ended Feb. 29, from £8.6 billion as of Feb. 28, 2019, said an update by the London-based PPF, Tuesday.
The funding ratio of these pension plans declined over the month to 93.2% as of Feb. 29, from 95.9% as of Jan. 31. The funding ratio was 99.5% a year ago, the update said.
Assets decreased 0.75% during the month and rose 7.4% for the year ended Feb. 29, to £1.721 trillion. Liabilities increased 2% over the month and increased 14% for the year to £1.845 trillion.
The PPF, which is the lifeboat fund for the defined benefit plans of insolvent U.K. companies, said in its update that the FTSE All-Share index fell 8.9% for the month and 1.4% for the year ended Feb. 29. Five- to 15-year index-linked gilt yields fell 11 basis points in February and 60 basis points over the year.
As of Feb. 29, 64% of the 5,422 pension funds covered by the index were in deficit, compared with 60% as of Jan. 31. A year ago, 57% of the 5,450 pension funds covered by the index were in deficit.
"As the COVID-19 epidemic spread across the globe, impacting supply chains, travel and corporate and domestic spending, its effects were felt in investment markets. Following a subdued response to news of the initial outbreak in January, February hit markets hard. Equities were down nearly 10% (and) 20-year U.K. gilt yields fell 0.09% while credit spreads rose by a similar amount. This means government bonds increased a further 2%, while credit stayed flat over the month," said Sion Cole, head of U.K. fiduciary business at BlackRock, in a response to the update.
Plans running low levels of hedging and high allocations to growth assets will be suffering and could have seen their funding levels fall by as much as 5% in February, Mr. Cole added.
