Accounting quirk reveals £18bn surplus but hides long-term investment concern

The firm said the "quirks" of pension scheme accounting give the appearance of a positive result for schemes in current market turmoil.

However, PCS managing director Charles Cowling warned against being complacent.

He said: "In the last few days and weeks we have seen unprecedented conditions in financial markets. The fact that accounting rules may show a positive impact on pension schemes from this market turbulence does not mean that these are easy times for schemes.

"We have seen an improvement in pension surpluses because the accounting value of the pension liabilities has fallen even more than the pension scheme assets.

"But this is because the under accounting rules the value of the liabilities is linked to the value of high quality double-A corporate bonds. A large number of double-A bonds are in the banking and financial sector and have been hit hard by the recent dramatic problems."

Cowling added: "The fact that double-A bonds of banks and other financial institutions have fallen sharply is not a good reason to regard your pension liabilities as suddenly being a lot lower. It is just a quirk of the accounting rules that is hiding the problems that many pension schemes currently face."

Watson Wyatt figures showed the aggregate defined benefit pension deficit of the UK’s biggest companies was "wiped out" during the tumultuous month of September.

The consultant said the pension deficit of the FTSE100 stood as a £12bn at the beginning of September but later turned round into a £30bn surplus by the end of the month.

Watson Wyatt head of DB consulting John Ball said: "It may seem counterintuitive to have what appears to be good news about pensions in a month of such financial drama. But it is not just share prices that affect the surpluses and deficits that companies have to disclose on their balance sheets.

"As far as the accountants are concerned, FTSE100 pensions are back in surplus. However, what will matter more to most companies is the attitude of their pension plan trustees, who are unlikely to take such a sanguine view of the current position."

Aon Consulting showed the deficits of the UK’s 200 largest occupational DB pension schemes dropped by £19bn to the end of September from a collective deficit of £25bn to £6bn, according to figures from the Aon200 Index.