The pension black hole of UKs defined benefit (DB) schemes grew by £100bn in the last month alone, bringing the total deficit to £710bn, according to PwCs Skyval Index.
The pension black hole of UK's defined benefit (DB) schemes grew by £100bn in the last month alone, bringing the total deficit to £710bn, according to PwC's Skyval Index.
The figure is based on liabilities used by trustees to determine company cash contributions of around 6,000 DB funds.
The index used three measures for the analysis: accounting, which represents the value of liabilities shown in company accounts; funding, which shows liabilities used by trustees to determine company cash contributions; and buy-out, meaning the value an insurer would place on the fund's liabilities.
As of 29 August 2016, deficit levels on an accounting basis reached £490bn, representing a £90bn increase from the previous month.
On a buy-out basis, deficits grew by £150bn over a month to £1,540bn.
Raj Mody, partner and PwC's global head of pensions, said half of funds had not protected themselves against falls in long-term interest rates.
"With the prospect of further action from the Bank of England to reassure the economy in these uncertain times, the challenging environment for pension funds is likely to endure for several years," he said.
"Companies and pension fund trustees should revisit their approach to the risk profile of their pension fund. They should also ask themselves if gilt yield measurements are still relevant for them when deciding how to measure and finance the deficit.
"There may be more appropriate measures that are better tailored to their own fund's strategy. This will give a more realistic view for trustees and sponsors helping them to make more effective decisions."
