On the go: The overall funding position of UK defined benefit schemes fell in August, according to figures released by the Pension Protection Fund on Tuesday.
The aggregate funding level of schemes in the PPF 7800 Index was down 3.5 percentage points from July 2019.
The figures are not good news for the 5,450 schemes in the index, which saw their aggregate deficit increase to £162.9bn from a shortfall of £90.7bn at the end of July.
The overall funding level decreased from 95 per cent at the end of July to 91.5 per cent.
The total shortfall of schemes in deficit rose to £273.5bn, up from £218bn at end July.
Total assets ended the month at £1.75tn, while liabilities totalled £1.91tn.
Source: PPF
According to Sion Cole, head of UK fiduciary business at BlackRock, DB funding levels now stand 6.5 percentage points lower than at the start of the year, and lower than they were throughout the whole of 2018.
This could be the result of tumbling gilt yields and increasing equity volatility, driven by political uncertainty.
Commenting on the figures, Mr Cole explained: “The main driver of the falls was a sharp decline in gilt yields, which fell 30 basis points across the curve.
“This was largely driven by geopolitics with [Donald] Trump suggesting new tariffs on Chinese imports.”
He continued: “In the UK, Brexit volatility continued with the prospect of a no-deal Brexit and/or a general election becoming more likely. UK and global equity markets were down 2-3 per cent over the month.
“Generally speaking, better-funded schemes have more hedging and are taking less investment risk, so will have coped better with the market turbulence in August,” he added.
“Conversely, their underfunded counterparts that need to chase returns will have been hit hardest.”
