The UK’s 350 largest listed companies have seen their defined benefit (DB) scheme deficits increase by £5bn in the third quarter of the year, reaching £34bn at the end of September, according to data from Mercer.
This rise was driven by an increase in liability values of £3bn to £821bn, and a fall in asset values of £2bn to £787bn, the consultancy firm said.
These figures contrast with the trend in the beginning of the year, when the gap more than halved.
In September, the quoted funding level remained unchanged when compared with the previous month, despite notable movements in asset and liability values, the firm said.
Liabilities decreased by £8bn due to an increase in corporate bond yields, partially offset by an increase in market implied inflation. However, asset values also fell by the same amount from their position at the end of August.
According to Alan Baker, head of DB solutions development and partner at Mercer, "market volatility is putting recent improvements in the funding deficit at risk".
He said: "Trustees and sponsors should act now to assess the risk they are running and ensure they have plans in place to protect them from any future downside."
LeRoy van Zyl, DB strategist and partner at Mercer, added: "We continue to see significant levels of activity, with trustees and sponsors taking action to reduce risk and lock in financial gains.
"With uncertainty set to continue in the run up to the UK’s departure from the EU early next year, trustees in particular should consider the potential impact on their sponsor’s financial security and how that could impact on their overall risk management plans."
Mercer estimates the aggregate combined funded ratio of plans operated by FTSE350 companies on a monthly basis based on projections of their reported financial statements adjusted from each company’s financial year end in line with financial indices. This includes UK domestic funded and unfunded plans and all non-domestic plans.
Figures from JLT Employee Benefits published this week (1 October) had shown DB funding levels overall were on the up and could enter into surplus based on the standard accounting measure (IAS19) used in company reports and accounts.
maria.espadinha@ft.com
