The combined deficit of the UKs private sector defined benefit pension schemes increased to £143bn last month, according to figures published by JLT Pension Capital Strategies today.
The consultancy's latest monthly update on schemes' funding position shows that, based on the standard accounting measure IAS19/FRS17, schemes' assets were worth £1,164bn as of March 31, while their liabilities were worth £1,307bn.
At the end of February, schemes' combined deficit had stood at £117bn, with assets of £1,142bn more than offset by liabilities of £1,259bn.
The increase in deficit was mirrored by figures for the FTSE100, where the combined deficit increased from £63bn at the end of February to £79bn at the end of March, and the FTSE350, where the combined deficit increased from £68bn to £86bn over the same period.
Despite this, JLT's managing director Charles Cowling noted that funding levels - the ratio between schemes' assets and liabilities - had improved slightly from the same point 12 months earlier, as a result of improvements in the equity market. Schemes' assets stood at 89% of the value of their liabilities at the end of March, compared to 88% a year earlier.
'Last week's Budget included an order to the Bank of England to consider using unconventional monetary tools to boost the economy. This is expected to keep bond rates low and so maintain high pension liabilities. However if the economy is boosted then equity asset values should increase and thus help to reduce pension scheme deficits,' he noted.
'The Cyprus crisis is also acting to keep bond rates low. Prior to this crisis the eurozone looked as though it was stabilising, and so UK bond rates were starting to rise, but this Cypriot effect could make UK bonds comparatively that bit more attractive.
He added: 'So overall we are expecting UK bond yields to remain low keeping scheme liabilities high, but there is the prospect of better future asset returns to continue helping improve funding levels.'
