The accounting deficit of FTSE 350 companies’ defined benefit (DB) pension schemes increased by £4bn in January to £80bn, according to Mercer.

Its Pension Risk Survey showed that liabilities declined by £34bn over the month to close January at £879bn due to a rise in corporate bond yields that was partially offset by an increase in market expectations of inflation.

However, assets fell by £38bn to end the month at £799bn, more than offsetting the reduction in liabilities and resulting in an increased deficit.

In the update, Mercer urged pension trustees and sponsoring employers to plan for 2022 and consider risk exposure.

“The cost of living may be failing to cut through politically amid the Downing Street party rows, but inflation is certainly giving pension schemes food for thought in 2022,” commented Mercer UK wealth trustee leader, Tess Page.

“Investment markets also took a bit of a hit during January, with global equity prices falling back.

“Trustees and scheme sponsors are looking ahead to a busy year in pensions, with the new Code of Practice and climate change reporting on the horizon, alongside cracking GMP equalisation and preparing for pensions dashboards.

“Those schemes that have already tackled their key risks around investments, inflation, and interest rates will be best-placed to navigate 2022.”

Mercer’s Pensions Risk 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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