UK - Market volatility seen this May has led to the largest single month-on-month increase in pension deficits in nearly two years, according to a Mercer analysis of UK pension funds.

Speaking with IPE, pension risk group leader Ali Tayyebi noted that, unlike the euro-zone related turbulence of last August, current doubts over Greece's ability to stay within the single currency had also impacted corporate bond yields.

"Although trustee funding calculations will be different to company accounting figures - because different assumptions are required - market conditions currently are placing more or less identical pressures on them, so trustees will be considering how to react to similarly bad news," he said.

Tayyebi said the impact of the sovereign debt crisis in the autumn of last year had presented different symptoms - with only government debt yields falling, while corporate rates remained stable.

"The trend now appears to be contrary to the increase in the perceived risk of corporate bonds as measured by credit default swaps and could be due to the significantly reduced issuances of corporate bonds in recent months," he said.

He said while Mercer was unsure of the exact underlying causes, the effect was that pension fund deficits had risen to levels last seen two years ago, with the biggest single rise in funding shortfalls since August 2010.

Mercer added that the ongoing crisis had exacerbated the "perceived safe-haven status" of the UK, with 20-year fixed interest gilt yields falling to 2.76% at the end of last week - bringing it close to the lowest point seen all year.

The consultancy estimated that, as a result of declining yields, deficits in FTSE 350 companies had increased by around a quarter, rising by £25bn (€31bn) to £94bn.

The figures are roughly in line with rival Towers Watson's calculations, although the latter consultancy estimated a steeper overall increase since the beginning of May - with deficits up by £30bn.

Despite this, Mercer and Towers Watson disagreed on the overall size of the 350 companies' deficits, with Towers Watson estimating a shortfall of only £92bn.