The deficit of all the defined benefit (DB) pension funds in the UK stood at £450bn at the end of November, an increase of £40bn since last month.
PwC’s Skyval index, based on data from 5,800 DB schemes, showed pension fund assets at almost £1.6trn and liabilities of £2trn.
Steven Dicker, chief actuary at PwC said that despite the increase in short-term interest rates by the Bank of England, long-term real interest rates, which are the main driver of the pension deficit number, moved slightly in the opposite direction.
He said: "This resulted in a £60bn increase to liabilities over the month, with assets growing modestly at £20bn, resulting in a net £40m increase in deficit.
"The economic drivers of long-term interest rates are complex and they are further impacted by supply and demand factors including quantitative easing, which leads to month-to-month swings in the deficit calculation using the ‘gilts plus’ approach."
Taking only private DB schemes into account, the deficit increased by £7bn to £161bn at the end of November, when compared with the previous month, according to data from JLT Employee Benefits.
The total deficit of FTSE 100 companies' DB schemes was £40bn, £1bn more than in the previous month.
Charles Cowling, director at JLT Employee Benefits, said that despite the first rise in interest rates for more than 10 years, November has been a quiet month for markets and pension schemes.
He said: “The rate rise was widely anticipated and, with inflation showing no further signs of increasing and a fairly neutral Budget, markets have remained calm. This is despite concerns over the poor economic outlook and Brexit.”
But he warned that many challenges remained.
Pension schemes, which are carrying out actuarial valuations in 2017, are likely to show much bigger deficits than at their last valuation in 2014, he added.
He said: “Finance directors will therefore be facing trustees asking for higher contributions.
“Moreover, for the few private sector schemes still left providing DB pensions to employees, the 2017 actuarial valuations will be showing much higher ongoing pension costs than 2014. The pressure will again be on private sector employers to find alternatives to DB pensions.”
Universities are currently facing industrial action over plans by the Universities Superannuation Scheme, the largest private sector pension in the country, to close down its DB scheme.
Royal Mail is offering workers the possibility of joining either a DB cash balance scheme or a defined contribution scheme, leading to workers voting in favour of industrial action.
Meanwhile British Airways has decided to close the larger of its two DB schemes because of a "significant and growing" deficit and has proposed a new scheme.
maria.espadinha@ft.com
