The pension deficit of the 350 largest listed companies in Britain grew by 28 percent in the quarter to September as narrowing corporate bond yield spreads offset the effect of an equity rally, consultant Mercer has said. Mercer estimated that the 350 largest listed companies total pension scheme deficit at the end of September was £140 billion compared to £109 billion at end of June and a £1 billion pound surplus a year ago.Pension schemes use corporate bond yields to derive the discount rates applied to calculations of future pension payments to retired scheme members.The financial crisis sent spreads to historic highs which helped reduce liability assumptions. However, spreads on AA corporate debt have since halved. The effect outweighed a 20 percent gain on equities over the quarter.Mercer predicted that even if the recent rally in equity markets continues, a continued correction of corporate bond spreads to pre-credit crunch levels could add a further E60 billion pounds to pension deficits.