Recovering equity markets have helped improve the average funding of UK pension funds, according to October’s data by the Pension Protection Fund (PPF).

According to the PPF 7800 index, funding improved to 82.7% at the end of October, up by nearly 3 percentage points, equating to an aggregate deficit of £262.5bn (€367.6bn).

Arno Kitts, head of UK institutional at BlackRock, credited improved valuations of higher-risk assets with the higher funding levels, with assets across the index rising by £18.5bn.

“Over the month, these assets recovered strongly with global equities delivering an 8% return, which explains the improvement in pension assets,” Kitts said.

“As risk appetite returned, long-dated interest rates rose by around 0.15%, reducing liability valuations and further driving improved funding levels.

“Corporate bonds outperformed government bonds, which also contributed positively to funding levels.”

However, despite the 1.5% growth in scheme assets compared with the end of September, the 4.5% year-to-date asset growth was easily outpaced by the 11% growth in liabilities since the beginning of the year.

In other news, the pension fund for cheese manufacturer Dairy Crest sold its stake in several properties back to its sponsor.

The £8.3m deal will reduce the company’s contributions by £2.8m a year through to 2018, and comes as it finalises the sale of its dairy business.

Ahead of the sale of the properties, which finalised in early November, the fund’s deficit stood at £33.2m, down from £47.1m at the end of March this year.

The £1bn pension fund currently pursues a liability-matching investment strategy, with nearly £600m invested in bonds and cash, and only £53m in equities.

The properties owned by the fund stand apart from the £60m asset-backed vehicle agreed in 2013, which saw the pension fund granted ownership of the company’s stock of maturing cheese.