The accounting deficit of FTSE 350 defined benefit (DB) pension schemes rose by £2bn over the course of August, standing at £87bn at the end of the month, according to Mercer.

The firm said the increase was driven by a £6bn increase in liabilities to £934bn compared to £928bn at the end of July, caused by a rise in market expectations for future inflation and slightly offset by a rise in corporate bond yields.

However, this was partially countered by asset values rising from £843bn at 31 July to £847bn at the end of August.

Mercer UK wealth trustee leader, Tess Page, said: “We’ve seen strong economic growth in recent months, but looking ahead the global economy faces challenges – Covid is back on the rise in many regions, and in the UK the winding down of government support may weigh on growth.

“The last month saw fairly small changes to aggregate funding levels, but the course ahead could well be a choppy one. Schemes with clear integrated risk management strategies will be well-prepared for the future.”

Mercer’s Pensions Risk Survey data relates to about 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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