The aggregate deficit of the around 5,500 defined benefit (DB) schemes in the Pension Protection Fund (PPF) 7800 Index has risen to £103.8bn at the end of December.
This represents a hike of £16.2bn when compared to the previous month's figures of £87.6bn.
The funding ratio decreased from 94.7 per cent at end of November 2017 to 93.9 per cent.
Defined benefit schemes’ total assets were £1.59trn, while total liabilities were £1.69trn.
There were 3,710 schemes in deficit and 1,878 schemes in surplus, the PPF said.
Changes should befit the scheme status and the current investment opportunities – don't be suckered in like the couch potato that signs up for the expensive gym on 1 January.Andy TunningleyAccording to Andy Tunningley, head of UK strategic clients at BlackRock, the new figures from the PPF show that "UK pension schemes faltered at the end of the year".
He said: "Despite buoyant equity markets boosting pension scheme asset values, real and nominal gilt yields drifted lower again over the month. However, looking back at 2017, it could be considered a purple patch for UK schemes.
"Aggregate funding levels have risen from around 80 per cent to around 94 per cent and the proportion of schemes with funding deficits fell from 75 per cent to 66 per cent.
"Although some of the improvement is due to the adoption of the latest Purple Book dataset in November, 2017 was a year in which return-seeking assets materially out-performed liabilities."
The pensions lifeboat recently changed the basis for estimating the funding position of DB schemes eligible to enter it should they default, by moving to the Purple Book 2017 dataset.
According to the PPF it is based on a more up-to-date list of schemes, excluding for example those that have entered PPF assessment, and it also uses more recent funding information.
PPF December figures are presenting, however, contradicting values when compared to the remaining DB schemes in the market.
According to data from JLT Employee Benefits, the shortfall of all UK private final salary schemes has decreased by £11bn in one month, to £150bn at the end of December.
Considering only FTSE 350 companies, the deficit of these firms DB plans fell £8bn, or 9 per cent, during 2017, according to data from Mercer.
Mr Tunningley argued that pension schemes should take the opportunity of the beginning of a new year to implement a new investment strategy.
He said: "We expect risk assets to perform well again in 2018, meaning pension schemes can again benefit from exposure to these markets – particularly equities and alternatives.
"We would suggest a typical pension fund adopts a modest bias towards these asset types – but be wary of pockets of overvaluation in certain private markets.
"It can be tempting to make a big change to portfolios at the turn of the year – but the changes should befit the scheme status and the current investment opportunities – don't be suckered in like the couch potato that signs up for the expensive gym on 1 January."
maria.espadinha@ft.com
