UK - Recent market turbulence and the subsequent decline in confidence in the UK banking sector have helped to improve pension fund surpluses - at least on paper, Aon Consulting claims.
AA-rated corporate bond yields have fallen "as the market is allowing for a higher risk of AA companies defaulting on their bond obligations," according to Aon.
As these bonds have to be used by companies as a benchmark measure for valuing pension scheme liabilities, the liabilities have fallen along with the bond value.
"As a knock-on effect pension schemes appear to be more attractively funded."
Aon calculated that the funding levels quoted by the largest 200 UK pension funds in their company accounts has improved 2% from an aggregate £10bn (€14.4bn) deficit at the end of August to a £5bn surplus at the end of September.
The consultancy added that 52% of the top 200 largest schemes in the UK are now in surplus.
However, David Poynton, head of credit analysis at Lane Clark & Peacock, said the credit crunch is a threat to defined benefit schemes as sponsoring employers are faced with increasing financing costs.
The Bank of England Credit Conditions Survey for Q3 2007 reported lending to the corporate sector has been cut back with corporate credit availability expected to fall further.
"This means that many sponsoring employers will be faced with increased costs of financing, as well as lenders looking for additional security for their lending," Poynton added.
"Shareholders are the most obvious losers from these developments but the additional financial strain on employers can also weaken the security of pension benefits."
Meanwhile, Tesco has reported a £214m improvement in the deficit of its various pension schemes over the last seven months.
The deficit fell from £950m in February of this year to £736m at the end of August.
Funding levels were improved by £155m in contributions from the company, investment gains and actuarial returns.
Since end-August the discount rate for the schemes, including the £3.5bn defined benefit scheme, has been raised from 5.2% to 5.8%.
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