The FTSE 350 defined benefit pension deficit increased for the second consecutive month, from £32bn to £34bn, as of 31 August 2018, according to Mercer’s Pension Risk Survey.

Mercer strategic adviser and partner, Maria Johannessen commented: “The small rise in the deficit is not alarming in itself but it does underline the clear need for pension scheme trustees and sponsors to be prepared for changing circumstances.”

Asset values rose by £1bn to £795bn, although this was not enough to offset the rise in liabilities, which increased by £3bn to £829bn due to a fall in corporate bond yields. The funding level remained at 96 per cent.

Mercer head of DB solutions development and partner, Alan Baker added: “The minor deterioration in funded status only partially offsets the huge reduction in the deficit so far this year.

"However, this is the second consecutive month that the gains made this year have been reversed. It is important that Trustees who run pension schemes should continue to assess how much risk they need to take now to meet their funding requirements.”

The rest of the year is expected to be an uncertain time, with the study predicting that 2018 will be a record year for pension risk transfer due to improving funding levels, attractive pricing in the market and uncertainty over Brexit.

Johannessen concluded: “High up on the agenda should be investment risk management and also the challenges of making effective decisions against the uncertain backdrop as we get closer to the date of the UK’s departure from the EU.”

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