The aggregate accounting deficit of FTSE 350 companies’ defined benefit (DB) pension schemes increased by £10bn during November to reach £104bn at the end of the month, according to Mercer's latest Pensions Risk Survey.

The increase in the deficit was driven by a £31bn rise in liabilities, from £931bn to £962bn, which Mercer attributed to a fall in corporate bond yields and an increase in market expectations of inflation.

This rise in liabilities was partially offset by assets rising by £21bn, from £837bn at the end of October to £858bn at the end of November.

“The impact on markets of the new Omicron variant served to highlight that the pandemic is not yet over,” commented Mercer UK wealth trustee leader, Tess Page.

“Alongside this fresh uncertainty, inflation remains a hot topic with significant increases observed and potentially more to come.

“Whilst some inflation drivers such as supply chain issues and reopening price pressures are arguably ‘temporary’, others may be longer term.

“As a pandemic-fatigued nation heads towards the Christmas break, this was a month in which unhedged assets again failed to keep pace with liabilities – risk management should be high on the agenda for all schemes in 2022.”

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.

The data underlying the survey is refreshed as companies report their year-end accounts.

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