The aggregate deficits of FTSE 100 organisations’ pension deficits grew by £27 billion in one week, according to data from Towers Watson.
The consultancy estimates that the deficits of the defined benefit (DB) schemes stood at £8 billion at the beginning of last week, but had increased to £35 billion when the markets closed on Thursday 3 November.
Pension fund assets increased slightly during this period, but a sharp fall in corporate bond yields has contributed to a 6% increase in the value of liabilities as measured under international accounting standards.
Assets are estimated to have grown by £2 billion, while liabilities increased by £29 billion.
Lower yields on AA-rated corporate bonds make pension liabilities in company accounts look bigger.
According to Towers Watson, a major factor behind this fall in yields was a flight to safety from investors after the Greek government announced its intention to hold a referendum on the proposed bailout.
This reduced yields on UK government bonds, which have only partly recovered since, and high-quality corporate bond yields moved the same way. The corporate bond yields used to calculate pension deficits were also reduced slightly by the latest monthly index revisions, which take account of how individual bonds have been re-rated.
The figures were calculated using Towers Watson’s Asset Liability Tracker (ALT), an online tool which provides pension scheme sponsors and trustees with daily valuations of their assets and liabilities and automatically alerts them when de-risking opportunities arise.
Rash Bhabra, head of corporate consulting at Towers Watson, said: “In less than a month, the gap between liabilities and pension fund assets narrowed from £46 billion to £7 billion and then widened again to £35 billion.
“These may be particularly uncertain times but this underlines the volatility to which organisations’ balance sheets are exposed through their pension schemes, and how easy it is for bad news on the markets to cancel out hard-earned operating profits.”
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