The liabilities of defined benefit (DB) pension schemes continued to increase last month amid further falls in yields, according to the Pension Protection Fund's (PPF) 7800 Index.
The latest figures showed total liabilities hit £1.8trn by the end of last month, up 3.5% from £1.7trn at the end of June.
Meanwhile, the funding ratio of the index's 5,945 schemes fell a further 0.6% to 77.4%.
The lifeboat fund also estimates deficits increased from £383.6bn to £408bn over the month, on an s179 basis, with an additional 25 schemes in deficit. Assets were calculated at £1.4trn, up slightly from £1.36trn at the end of June.
However, the increase was not as high as over June, when deficits rose by around 30% due to record-low gilt yields in the wake of the vote to leave the European Union.
According to the PPF's update, conventional 15-year gilt yields fell by 24 basis points (bps) over July, while index-linked 15-year gilt yields fell by 3bps. Assets rose by 2.8% reflecting the impact of both higher gilt prices and stock markets, while the FTSE All-Share Index rose by 3.9% over the month.
Over the year to July 2016, 15-year gilt yields were down by 106bps, while index-linked 15-year gilt yields were down 52bps. The FTSE All-Share Index had changed little over the year.
Blackrock head of UK strategic clients Andy Tunningley said trustees need to consider new approaches to tackling the funding crisis.
"The tremors following the UK's decision to leave the EU continue to be felt. The path of future rates is likely to be even lower for an even longer period, confirmed by the Bank of England's (BoE) decision to cut the bank rate to 0.25% and indications there could be further cuts to around zero."
"UK pension funds need to think about different solutions to their long-standing problems. Whether it means further exploring overseas investments, using private markets to tap into illiquidity premia or using more derivatives to increase liability hedging, it has become clear UK pension trustees need to think outside of the box to meet their scheme objectives."
The PPF's latest figures do not take into account the effect of the BoE's decision on 4 August to cut the base rate to 0.25%, which is likely to impact on scheme deficits further.
Mercer estimates DB liabilities of the FTSE350 companies were hit by a further £10bn increase over the five days from 31 July. It said the BoE rate cut caused liabilities and deficits to hit a record high of £870bn and £149bn, on an accounting basis.
Its retirement business senior partner Ali Tayyebi said: "This sudden increase reminds us it is the outlook for future long-term secure investment returns which drives pension scheme deficits - much more than the short-term performance of assets."
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