The UK’s 200 largest privately sponsored defined benefit (DB) pension schemes saw their deficits increase by £15.7bn to £77.6bn during October, according to Aon Consulting.

The shrinking of the deficit in September, down from £78bn to £61.9bn, has been almost entirely undone. Deficits are now firmly well north of the £70 billion mark again, a region where they have now spent four of the last five months.

According to Sarah Abraham, consultant and actuary at Aon Consulting,

“Currently many investors believe that the Government will be unable to deliver its annual inflation target of 2%. This increases pension scheme deficits because most pension schemes promise to pay benefits that are linked to inflation.

And it is this belief that price inflation will exceed the 2% target level, combined with a softening of asset prices, which has caused deficits to widen again.

With the largest 200 DB pension schemes combined having spent all of 2009 so far in deficit, the likelhood of moving out of the red any time soon is beginning to verge on wishful thinking.

UPDATE: The standard 750 x 500 pixel version has been added to Flickr.

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