Falling bond yields and equity prices following the UK’s decision to leave the EU will likely result in larger deficits for UK pension funds, according to analysts at J.P. Morgan.

The yield on 10-year UK government bonds tumbled as much as 15 basis points at the start of week following the Brexit vote.

Meanwhile billions of pounds have been wiped off the value of British bank stocks.

“For pension funds this is the bear case scenario – liabilities rise as yields fall, assets held in bonds also rise and equity holdings fall,” said Peter Elwin, analyst at J.P Morgan Securities.

“The net result will be materially larger deficits.”

On average UK pension plans hold 33% in equities and 48% in bonds, with 6% in hedge funds, 5% in real estate, and 5% in other asset classes according to 2015 statistics from the Pension Protection Fund.

FTSE 100 companies International Continental Airlines, Sainsbury, RSA Insurance, BT and Marks & Spencer are top of J.P. Morgan’s pension liability risk list.

“If one assumed the bond portion rose 9% (matching the liability increase), and everything else fell by 5%, then a typical pension plan would increase by 2%,” Elwin added in his research note to clients.

“If liabilities increase by 9% and pension assets increase by 2% then deficits will widen – the magnitude will depend upon the size of the deficit prior to these market moves (as well as the individual asset allocation within the plan, liability/asset duration mis-match etc).”

However, the London-based analyst points out that UK pension plans re-price their actuarial deficits once every three years.

In addition, the result of complex negotiations between the pension trustees and the company might not impact cash flows until end September 2017.

Pension plans which have already priced will not be re-priced, although trustees could negotiate harder to achieve shorter repayment timetables which would increase annual contributions.

The question for the medium term, according to Elwin, is where will real yields land?

“UK actuarial pension deficits are ultimately driven by real gilt yields – if these continue to fall then trustees will need to ask for more cash from corporate sponsors,” the analyst concludes.