Pension deficits remained stubbornly high in January 2012, with no improvement following the deterioration seen last year, Mercer said today.
The consultancy's latest Pensions Risk Survey found that, as of January 31, the aggregate FTSE350 IAS19 defined benefit pension deficit stood at £83bn - equivalent to a funding ratio of 85%. This compared to £84bn at December 31 2011 and just £64bn at December 31 2010.
Asset values increased over the month - from £478bn at December 31 2011 to £487bn at the end of last month - but this was broadly matched by an increase in liability values - from £562bn to £570bn over the same period. According to Mercer, this increase was due to a small reduction in the corporate bond yields used to discount liabilities.
Ali Tayyebi, senior partner and pension risk group leader at Mercer, said it was 'disappointing' to see no improvement in funding levels in January, with deficits remaining 'stubbornly high'.
'The changes in January highlight a number of factors at play driving the overall funding level. Although the FTSE100 increased by around 2% over the month, pressure remained on the liability side with AA corporate bond yields reducing even further over the month,' he added.
Mercer's data relates to around 50% of pension scheme liabilities and analyses pension deficits calculated using the approach companies have to adopt for their corporate accounts.
Taking into account other measures and based on data published last week in the Pension Regulator's Purple Book, as of March 31 2011 UK pension schemes as a whole had an asset shortfall of £471bn relative to the amount it is estimated would be required to buy out their liabilities in the insurance market.
Mr Tayyebi said this data showed the scale of the problem faced by UK companies, which confirmed the deficit issue was 'unlikely to be resolved in the short term'.
Looking ahead to the picture for 2012, Adrian Hartshorn, partner in Mercer's financial strategy group called on companies to be positioned 'carefully'.
'With Gilt yields remaining close to their record low point and significant market uncertainty caused by, amongst other things, the Euro zone currency issues, clients need to position themselves carefully for 2012,' he said.
He added: 'With an increasing number of companies taking action, shareholders of companies with legacy defined benefit plans will expect management to have a well defined strategy in place.'