The combined deficit of the UKs defined benefit pension schemes increased to £587bn last month as record low corporate bond yields hit schemes funding positions, Xafinity Corporate Solutions said today.
The consultancy's latest index of UK DB schemes' funding positions reveals a 15% increase in scheme liabilities, from £1,587bn at the end of June to £1,675bn at the end of last month.
This was slightly compensated for by a small increase in schemes' combined assets over the same period - from £1,074bn to £1,097bn.
But Xafinity's analysis means that, based on FRS17 and IAS19 accounting standards, the combined deficit of DB pension schemes at the end of last month was £74bn higher than a month earlier.
Just 12 months earlier, at the end of July 2011, the combined deficit of the UK's DB pension schemes was £374bn.
Last month saw corporate bond yields fall below 4%, lower than at any time in the history of accounting standards, and Xafinity warned a failure to reverse this trend could mean companies have to report a 65% increase in their deficits if they report their financial results in December.
Changes in IAS19 rules will also lead to a fall in the credit firms receive in these financial statements for returns on scheme assets, while a large deficit leads to interest charges that will also affect firm's results, Xafinity added.
Hugh Creasy, director at Xafinity Corporate Solutions, said: 'The Jubilee and Olympics have brought little cheer for companies with defined benefit pension liabilities. For four months we have seen stagnation of the deficits at over half a trillion pounds, which was alarming enough for companies, but the recent crash in corporate bond yields could spell disaster as companies may be faced with reporting jumps in their deficits of around 65%.'
