The defined benefit pension deficits of the UKs largest companies jumped by 50% to £96bn in the first two weeks of October, consultants Hymans Robertson have found.
Collective defined benefit pension deficits for FTSE350 businesses grew from £63bn on September 30 to £96bn on October 15, because of equity market falls and a drop in gilt yields, the firm said.
'This is taking us back to funding levels seen in the summer of last year. A typical scheme will have seen their funding level drop by around 5 and 10% since the beginning of September,' said Jon Hatchett, head of corporate consulting at Hymans Robertson.
'The collective FTSE350, despite paying in cash contributions of around £15bn last year, has ended up in a worse position that it was 12 months ago.'
The firm said market volatility highlighted the need for companies to continually look for ways to de-risk their pension schemes to reduce the possibility of paying out more cash in the future.
It noted that equity markets had a difficult September and early October with the FTSE100 index down from a high 6900 to around 6200 in the last few days, due to a decline in gilt yields, global economic slowdown, the Ebola outbreak and political instability.
Hatchett said: 'The short-term outlook remains unclear and, in these instances, markets often overshoot. We would not recommend knee-jerk reactions to short-term market moves.
'Pension scheme funding is a long-term process and the recent falls will not necessarily have knocked the scheme off the long-term track. However, the greatest concern will likely be for companies who have schemes nearing a valuation.
'In environments such as this, daily online monitoring of scheme funding and forward-looking risk analytics are essential tools for managing schemes.'
