On the go: The aggregate deficit of the 5,422 defined benefit schemes in the Pension Protection Fund 7800 Index rose by £49.9bn in February.
This meant the shortfall increased to £124.6bn at the end of February from £74.7bn in January.
Section 179 liabilities, the level of assets needed to secure PPF-level benefits with an insurer, were 93.2 per cent in January, down from 95.9 per cent in the previous month.
By the end of February the total assets in DB schemes were £1.72tn, while total liabilities stood at £1.85tn. There were 3,492 schemes in deficit and 1,930 schemes in surplus, the PPF stated.
According to Sion Cole, head of UK fiduciary business at BlackRock, the health of UK pension schemes, as well as the population, was put under significant strain following the outbreak of coronavirus during February.
“As the Covid-19 epidemic spread across the globe, impacting supply chains, travel, and corporate and domestic spending, its effects were felt in investment markets. Following a subdued response to news of the initial outbreak in January, February hit markets hard,” he said.
Mr Cole noted that equities were down nearly 10 per cent, while 20-year UK gilt yields fell 0.09 per cent and credit spreads rose by a similar amount.
“This means government bonds – and UK pension liabilities – increased a further 2 per cent, while credit stayed flat over the month. UK pension scheme assets therefore decreased, so funding levels, as measured by the PPF 7800 Index, fell 2.7 per cent in February [and will have fallen further at the start of March].”
However, “this is no time for pension investors to sell all and self-isolate”, Mr Cole said.
“We continue to believe that long-term investors should remain level-headed and take a long-term perspective. The economy and financial systems are in much better health than in 2008.
“Provided there is decisive action by policymakers, we expect that the outbreak will eventually dissipate and economic activity will normalise,” he added.
