The aggregate deficit of UK corporate pension schemes with a shortfall soared to a record at the end of December, according to one official measure, as the effects of falling interest rates – which cause liabilities to swell – overwhelmed the impact of higher stock markets.

The UK’s Pension Protection Fund said that at the end of December, its 7800 Index, which measures the assets and liabilities of UK schemes, showed a record shortfall for schemes in deficit of £277.1bn ($429.2bn), up from £246.7bn at the end of November 2011 and from £61.0bn at the end of December 2010.

The latest numbers have provoked the National Association of Pension Funds, a trade body representing employers who sponsor retirement funds, to underscore the need for funding rules to be applied flexibly.

Joanne Segars, NAPF chief executive, said: “This Index shows that pension funds are falling even further into the red, and businesses will be under more pressure to fill in the deficits.

“It’s a stark and painful reflection of the burdens on final salary pensions in the private sector.”

Most recently, the oil group Shell UK announced it would no longer allow new employees to join its final salary pension scheme, becoming the last FTSE 100 employer to close its doors to new members.

“These figures do not reflect the long-term health of pension funds, which work over a long time frame and are able to manage the effects of market volatility,” Ms Segars said.

She added that it was “important to stress that the underlying pension liabilities – the amounts they have to pay out – have not changed much over the past 12 months”.

For calendar year 2011, total scheme liabilities – including the roughly 20 per cent of schemes that do not have a shortfall – rose by about a third, mostly reflecting a 1.5 percentage point drop in 15-year gilt yields.

The NAPF renewed its plea for the Pensions Regulator to allow employers flexibility in making good on shortfalls.

The Pension Protection Fund said that a 0.24 percentage point fall in 15-year gilt yields over the month of December inflated liabilities by 3.6 per cent, more than offsetting a 1.2 per cent rise in asset values, bolstered partly by a rise in the capital value of gilts as rates fell.

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