UK pension funds deficit grows to over £710bn

The United Kingdom's overall deficit for its benefit pension funds has increased by £100bn in a month to reach £710bn, a new report says.

Research carried out by PricewaterhouseCooper showed that the pension schemes in the UK are liable to pay out £2,160bn, and total assets only reach £1,450bn

The effect of Britain's vote to leave the European Union has been felt, as gilt yields lower and companies have had to make up the difference to meet future pension payouts.

Yorkshire-based plastic and LED firm Carclo has had to retract a previously announced dividend payout to its shareholders in October, following the drop in bond yield levels. A statement from the company said that the increase of its pension deficit would "extinguish the company's available distributable reserves".

The yield on the 10-year gilt has stumbled from 1.3% before the crucial vote to just 0.61% this week, the lowest it has ever been.

Global head of pensions at PwC Raj Mody said that the difficult period for pension funds is unlikely to go away any time soon.

“The challenging environment for pension funds is likely to endure for several years, companies and pension fund trustees should ask themselves if gilt yield measurements are still relevant for them when deciding how to measure and finance the deficit," said Mody.