£40bn growth in gold-plated pension scheme deficit in August

The gaping hole in gold-plated company pension schemes widened by £40 billion last month, according to research.

The PwC Skyval Index showed the deficit in defined benefit (DB) pension funds ballooned by 10% to £460 billion month-on-month in August.

The health check on DB schemes, which guarantees a retirement income linked to final salaries, is based on data from around 5,800 funds.

It found that assets stood at £1,570 billion, with a liability target of £2,030 billion, leaving a shortfall of £460 billion.

Steven Dicker, PwC's chief actuary, said: "August saw a small decrease in long-term real interest rates (interest rates relative to inflation) as measured by Government bond yields, which has led to a £60 billion increase in liabilities.

"In contrast, assets have only grown very modestly by £20 billion. Consequently, deficit has increased by £40 billion.

"The deficit calculation is based on a 'gilts+' approach and is sensitive to even modest market movements.

"Compounding with the uncertain economic and political climate, the deficits calculated on this basis are likely to remain volatile."

It comes after the deficit for DB schemes - known as the "Rolls-Royce" of pensions - jumped by £90 billion last year to stand at £560 billion by the end of 2016, according to PwC.

The data released in January showed the EU referendum alone sparked an £80 billion shortfall within just 24 hours, with the deficit rising from £510 billion to £590 billion between June 23 and June 24.