The aggregate deficit of more than 6,000 UK defined benefit (DB) schemes in the Pension Protection Fund (PPF) 7800 index decreased by £32.1bn over December 2013.

Research by the PPF has revealed that the deficit fell from £59.7bn at the end of November 2013 to £27.6bn at the end of December.

The PPF said that the position has improved over on the previous year, when a deficit of £221.2bn was recorded at the end of December 2012.

Higher nominal and index-linked gilt yields helped the liabilities to fall by 2.7% over December, the PPF said.

In December, 15-year gilt yields rose by 21 basis points, while 15-year index-linked gilt yields rose by 9 basis points and the FTSE All-Share Index rose by 1.7%.

The funding ration improved over the month from 95% to 97.6%, which is higher than the 82.8% recorded in December 2012.

Within the PPF's index, total assets were £1.13trn. The PPF said that schemes assets were broadly unchanged, but over the year, there was an increase of 6.4%

Total liabilities were £1.16trn at the end of December 2013, which is a decrease of 2.7% over the month and a decrease of 9.8% over the year.

There were 3,701 schemes in deficit at the end of December 2013, representing 60.2% of the total 6,150 DB schemes. The number of schemes in surplus increased to 2,449 from 1,243 at the end of December 2012.

Despite the PPF's figures, Towers Watson head of UK pensions John Ball said: "The dramatic improvement in the PPF numbers is not a story that will be recognised by companies putting the finishing touches to their 2013 accounting disclosures.

"Higher anticipated inflation makes more difference to the cost of paying full benefits than it does do to PPF compensation, and corporate bond yields did not rise in tandem with gilt yields during 2013."

First published 15.01.2014

monique_simpson@wilmington.co.uk