The collective deficit of the UK's private sector final salary pension schemes have gone up with £104.5bn during the month of May, new figures from the Pension Protection Fund (PPF) show.

The aggregate deficit (total s179 liabilities minus total assets) of the schemes in the PPF 7800 index is estimated to have increased to £312.1bn at the end of May 2012, from £216.8bn at the end of April 2012. The position has seriously worsened on the previous year, the PPF said, when a deficit of £24.5bn was recorded at the end of May 2011.

The funding ratio of the 6,432 schemes in the index decreased from 82.6% to 76.8%. Total assets were £1030.8bn and total liabilities were £1343bn.

The deficit in May is a new record for UK schemes.

The number of schemes in deficit at the end of May 2012 increased to 5,503, representing 85.6% of the total 6,432 defined benefit (DB) schemes. There were 5,228 schemes in deficit at the end of April 2012 and 4,164 schemes in deficit at the end of May 2011.

Though the monthly figures are generally quite volatile they give an indication of how the long-term cost of pension schemes has risen. One explanation that has been given in the past few months is the effects of the Bank of England's approach to bolstering the economy by using quantitative easing (QE). This, say opponents, has driven up the cost government bonds and driven down yields for investors buying them.

The PPF indicates that not only the gilts but also the equity markets are the main drivers of the recent change in funding levels, saying: "Scheme liabilities are sensitive to the yields available on a range of conventional and index-linked gilts. Liabilities are also time-sensitive in that, even if gilt yields were unchanged, scheme liabilities would increase as the point of payment approaches."

"The value of scheme assets is affected by the change in prices of all the major asset classes, not just equity markets. However, due to their weight in asset allocation and volatility, equities are usually the biggest driver behind changes in scheme assets.

"Over the month, 15 year gilt yields fell by 55 basis points, which resulted in liabilities increasing by 7.6%. The large rise in gilt prices offset nearly all the deterioration in equity markets, with assets falling by only 0.1%".

Over the year to May 2012, 15-year gilt yields were down by 173 basis points and the FTSE All-Share Index fell by 11.3%.

First published 12.06.2012

azeevalkink@wilmington.co.uk