The pension deficit for defined benefit schemes in the FTSE 350 decreased by £9bn over June to £48bn, Mercer has revealed.

In its latest monthly Pension Risk Survey, Mercer found that liabilities had increased by £4bn to £860bn due to a 0.07 per cent fall in corporate bond yields, although this was mitigated by a 0.05 per cent decline in market implied inflation.

However, the rising liability values were offset by a £13bn increase in assets from the end of May, closing June at £812bn.

Mercer urged pension trustees to prioritise risk management due to the ongoing uncertainty caused by Brexit and the Prime Minister’s resignation, which is likely to cause markets to be volatile in the coming months.

Mercer actuary, Charles Cowling, commented: “In spite of the welcome decline in the deficit this month, significant macroeconomic and political headwinds remain.

“The UK awaits a new Prime Minister following Theresa May’s resignation last month and Britain’s negotiating position on Brexit is far from clear. A combination of global trade tensions and an increased perceived likelihood of a no-deal Brexit means we expect market volatility to be a consistent feature of the months ahead.

“Lower energy prices and weakening UK growth are reflected in CPI inflation falling back recently. However, a Brexit sterling crisis and resulting inflation shock is still a real possibility.

“In this uncertain environment trustees should continue to prioritise risk management and actively seek to take advantage of market opportunities to de-risk.”

Mercer’s data relates to about 50 per cent of all UK pension scheme liabilities and analyses pension deficits calculated using the approach companies have to adopt for their corporate accounts.

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