The combined funding position of the UK's defined benefit (DB) schemes improved by £50bn over October, PwC analysis suggests.
At the end of the month, the aggregate deficit totalled £410bn, with £2trn of liabilities and £1.5trn of assets, resulting in a 79% funding level.
The Skyval index's figures are calculated on the basis of the funding measures used by trustees to calculate cash contributions needed from sponsoring employers.
The deficit is 11% smaller than at the end of September.
Chief actuary Steven Dicker said the figures show how the ‘gilts plus' method of valuing liabilities can cause significant short-term variance.
"October saw a £40bn decrease in liabilities due to a small increase in long-term real interest rates (interest rates relative to inflation) as measured by government bond yields, while assets have grown modestly, which helped to reduce the overall deficit by £50bn," he said.
"This illustrates the significant volatility with the ‘gilts plus' approach to measuring pension scheme funding."
IAS 19 accounting figures
Meanwhile, the funding level saw a similar improvement under the IAS 19 accounting measure, JLT Employee Benefits said, moving from 90% to 91.1%.
The deficit under this measure fell from £174bn to £154bn over the month, with assets and liabilities totalling £1.6trn and £1.7trn respectively.
FTSE 350 schemes also saw a deficit reduction; these schemes were underfunded by £49bn at the end of October, compared to £57bn in September.
Assets totalled £760bn while liabilities sat at £809bn, leading to a funding level of 93.9%.
Director Charles Cowling said: "Despite concerns over rising inflation, buoyant equity markets have continued to deliver good news for DB pension schemes as pension deficits continue to drift lower."
He added the rising inflation has led to the Bank of England mooting it will raise interest rates this month from the current level of 0.25%.
"After nearly 10 years of painful reductions, rising interest rates will be seen as a relief for pension schemes as it will reduce the value attached to their liabilities. As a result, many will be hoping to see continued reductions in pension deficits.
"However, many challenges still remain. Pension schemes which are carrying out actuarial valuations in 2017 are likely to show bigger deficits than in 2014, and finance directors, will therefore be facing trustees asking for ‘more please'. But, for now, trustees and finance directors may wish to take advantage of these slightly calmer waters to explore opportunities to offload and settle pension liabilities."
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