The combined deficit of the UKs 6,000 defined benefit pension funds fell by £20bn in September to £690bn after a record high the previous month.
That is according to PwC's latest Skyval Index, which shows that funds now have collective liabilities of £2,140bn and assets of £1,450bn.
However, September's market movements show that they are dealing with the impact of short-term volatility, combined with long-term challenges arising from low interest rates.
"This can particularly affect funds with larger short-term benefit payments to meet," PwC global head of pensions, Raj Mody.
"It depends on whether their asset portfolio is properly set up to meet those demands without having to make emergency changes to release cash."
The asset, liability and deficit levels of DB pension funds are shown below:
The funding measure is based on the value of liabilities used by trustees to determine company cash contributions, while the accounting one reflects data shown in company accounts, discounting future obligations.
PwC's 'buy-out' data is based on the value an insurer would typically place on the fund's liabilities, but is a hypothetical scenario as there is not enough capital market capacity for all funds to buy out their total liabilities at once.
Although the deficit situation arises from long-term interest rates, Mody said the fact that pension liabilities depend on inflation and life expectancy may leave trustees questioning why interest rates matter.
He also highlights how pension benefits are not calculated with reference to interest rates, but said: "Company sponsors are under pressure to finance funds over a much shorter period than its whole lifetime.
"If long-term returns are forecast to be lower, this can increase the cash demands on company sponsors, to make good the difference in the short-term."
Mody was also keen to warn that, although they serve a purpose for historic financial accounts, reported accounting numbers should not be relied on to inform decisions as they are not tailored to funds' specific circumstances.
"The apparent deficit situation for each pension scheme need not be taken at face value. Schemes should look again at the most appropriate forecast returns to use, specific to their situation," he concluded.
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