Companies have been forced to wipe £46bn off of their year-end accounts due to massive pension losses for the year ending 31 March 2009, says Aon Consulting.

The employee risk and benefits management firm said the aggregate deficit at the end of March was £36bn, which in March 2008 stood at a £10bn surplus. Despite the losses, however, companies will be relieved as these losses could have been £80bn if the year-end had been three weeks earlier.

March 2009 was one of the most testing months for companies using a defined benefit (DB) pension scheme over the past year, with deficits plunging to £73bn in early March. The Aon200 Index measures the pensions accounting position of the 200 largest privately sponsored pension schemes.

Aon also said that quantitative easing has had an indirect effect on pension scheme accounting deficits because the value placed on liabilities is calculated with reference to yields on corporate bonds.

"Pensions accounting has become a lottery based on a company's choice of accounting date," said Sarah Abraham, consultant and actuary at Aon Consulting.

"Whilst there is always an element of luck as to how the deficit will look at the reporting date, this has been exacerbated by the recent asset volatility. Unfortunately, on top of this the effect of quantitative easing loaded the odds against employers who were reporting at the end of March. There will, however, be some comfort that the year-end did not fall three weeks earlier, when losses could have been as high as £80bn."

Abraham added that funding valuations will be subject to this "lottery effect", with employers calculating pension scheme deficits on a given date. "In this case, the impact of quantitative easing may mean excessively heavy funding requirements for employers who have funding valuations due at the end of March." She recommends seeking proper advice with regards to assumptions that are used in the calculation of liabilities.

- Pensions Age April 2009

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