Total deficits of defined benefit (DB) schemes in the Pension Protection Fund (PPF) 7800 increased by more than a third over last month against a backdrop of falling gilt yields.
Liabilities rose by 6.4% at the end of last month with conventional and index-linked 15-year gilt yields falling by 34 basis points (bps) and 20 bps respectively.
The aggregate funding ratio funding ratio worsened from 84.9% to 80.5% and there were 4,923 schemes in deficit and 1,022 schemes in surplus.
Over the year to January 2016, 15-year gilt yields were up by 33 bps and the FTSE All-Share Index was down by 7.9%. Over the month, DB pension assets rose by 0.9% while the FTSE All-Share Index fell by 3.1%.
Despite deficits increasing over the month, this was an improvement from 2015 when a deficit of £367.5bn was recorded at the end of January.
BlackRock head of UK strategic clients Andy Tunningley said investor concerns over the possibility of an economic slowdown had led to negative equity returns for UK pension funds. Despite this he pointed out that UK asset valuations nevertheless rose as bad stock performance was more than offset by falling government bond yields, boosting fixed income performance.
"We believe that volatility and low returns will remain a significant concern going forward," Tunningley said. "As markets continue to second guess the policy actions of the People's Bank of China, the European Central Bank and the Bank of England, we anticipate that we will experience more frequent episodes of heightened volatility, changes in correlations and intermittent liquidity.
"This places greater emphasis on effective risk management and achieving an optimal allocation across assets. The increased interest rate volatility over the recent months reiterates the potential impact of inadequately hedged liabilities and the importance of liability hedging to manage interest rate and inflation fluctuations. We suggest that investors with low hedge ratios should plan a hedging programme that is not solely dependent on improvements in current conditions," he added.
The number of defined benefit (DB) scheme members with benefits protected by an insurer will double by the middle of the decade, according to Lane Clark & Peacock (LCP).
Aviva Life & Pensions has concluded an £875m buy-in with its own staff pension scheme, following on from a similar transaction last year.
Nearly every trustee is confident of the next stage in their scheme’s strategy, despite almost an equal number being forced to consider replacing plans within the prior 12 months, according to research by Barnett Waddingham.
Companies could be overstating their pension liabilities by up to £60bn due to their life expectancy assumptions, according to XPS Pensions Group.
Just Group has completed a £74m pensioner buy-in with the UK pension scheme of a US-listed engineering business.