The last four years have seen over £100bn wiped off pension fund deficits, which reached their lowest level in May since the FRS17 accounting standard was introduced six years ago.
Aon Consulting says the overall corporate pension deficit in May was £3bn. Almost half the biggest 200 defined-benefit funds are now in surplus compared with almost a third at the end of April.
Rises in equity markets and bond yields have combined to lift deficits from their peak of over £100bn on March 12, 2003.
The pension consultancy says the number of pension funds in surplus is expected to continue rising over the long term and the aggregate surplus is expected to increase.
But it does not expect improved pension surpluses to prevent increasing numbers of pension schemes closing to future accruals.
It also warns that FRS17 surpluses will need to top £100bn before pension promises can be fully secured with insurance companies.
Senior consultant and actuary Marcus Hurd said: “The era of the pension scheme accounting surplus has clearly begun. Companies and trustees now face the dilemma of whether to target fully securing pension benefits with insurance companies. In many cases, however, this would not make financial sense for sponsoring employers because the aggregate cost of £100bn is prohibitive. In addition, the insurance market is currently unable to accommodate the required £600bn of pension scheme liabilities.
“Companies should also be aware of their ability to recognise surpluses in their accounts. The use of contingent assets and careful wording in schemes’ rules can be critical to ensuring that pension scheme surplus can be recognised by companies when producing annual accounts.”