The accounting deficit of defined benefit (DB) pension schemes for the UK’s 350 largest listed companies increased by £5bn to £81bn in May, according to Mercer.

The company’s Pensions Risk Survey data showed that the increase from £76bn was driven by a £9bn increase in liabilities to £884bn, with this being attributed to a fall in corporate bond yields and a small increase in inflation expectations.

This rise in liabilities outstripped a £4bn increase in assets to £803bn.

Having examined the state of DB funding in the UK, Mercer took the opportunity to share its thoughts on The Pensions Regulator’s (TPR’s) Annual Funding Statement, which was released in May.

Mercer partner and UK wealth trustee leader, Tess Page, said: “In its 2021 Annual Funding Statement, TPR issued a clear call to action on the need for an integrated approach to managing funding and investment risk that reflects the employer’s covenant and incorporates a path towards a long-term objective.

“We are all starting to feel optimistic about the easing of restrictions, but in a post-crisis world trustees need, more than ever, to understand what level of cash contributions employers can truly afford and where their risks lie. Aligning all stakeholders on a path toward a long-term objective must be the focus as we emerge from lockdown life.”

Mercer’s survey data relates to approximately 50 per cent of all UK pension scheme liabilities, with analysis focused on pension deficits calculated using the approach companies have to adopt for their corporate accounts.

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