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The funding deficit for defined benefit (DB) pension schemes increased by £90 billion over the course of 2016 to reach £560 billion in December 2016, according to research by PricewaterhouseCoopers (PWC).

Its Skyval index, which is based on data gathered via the Skyval platform used by pension funds, also found that the deficit of DB pension funds fell by £20 billion between November 2016 and December 2016.

Looking at pension activity over the course of 2016, the index found that aggregate pension deficits in UK private sector funded DB schemes increased by £80 billion between 23 and 24 June 2016 following the European Union (EU) referendum result. Pension funding targets rose by £130 billion in the week following the Bank of England's interest rate cut in August 2016, and pension asset values increased by £60 billion.

In December 2016, pension assets and liability targets were £1,480 billion and £2,040 billion, respectively, according to the funding measure, which is used by pension trustees to determine organisations' cash contributions.

Raj Mody (pictured), global head of pensions at PWC, said: "2016 saw huge change and volatility for pension funds, and the start of a renewed debate about how to measure and finance long-term pension commitments.

"I expect that 2017 will be the year when pension fund trustees and sponsors reach more informed conclusions about how to tackle their pension deficit and financing strategy. Those involved are increasingly realising the importance of transparency in order to decide appropriate strategy.

"Defined benefit pensions are long-term commitments stretching out over several decades and so there is limited value in pension funds making decisions based on simplified information. There is a need to understand the cashflow profile of the fund year-by-year, not just summarised figures. While the aggregate deficit for DB pensions appears to have deteriorated considerably over 2016, the impact for individual funds will vary."

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