UK pension schemes move into surplus

UK pension schemes are in surplus for the first time since accounting standard FRS17 was introduced in June 2001.

The date that the aggregate UK pension accounting surplus was recorded, marks a more than £50bn improvement in FRS17 scheme net valuations in two months, according to research by Aon Consulting.

Over the last three months, the aggregate deficit has been subject to substantial volatility. The largest single day increase in pensions deficit was £11bn recorded on 27 February 2007. At its recent peak, the aggregate deficit was as high as £50bn in March this year.

The improvements in the aggregate position for UK pension schemes has been caused predominantly by increases in bond yields, the benchmark measure of pension scheme deficits for accounting purposes. Strong investment performance is also thought to have improved the position.

Marcus Hurd, senior consultant and actuary at Aon Consulting, said that that average UK pension fund is now likely to be in surplus. “Whilst FRS17 is only one measure of the pension funding position, this is clearly a significant move towards avoiding a future pensions crisis. Attention will now focus on those schemes, which are not in surplus and have uncovered pension liabilities of £18bn.”