Warning on pension over-payments

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Research from Aon Consulting revealed that after years of running in deficit, the largest 200 UK pension schemes are likely to be out of the red by 2010.

According to latest figures, the total pensions "black hole" facing the 200 biggest schemes was £26 billion at the end of March, while the figure for the FTSE 100 was £19 billion.

Projections reveal that there is a 61% chance that pension schemes will have a combined surplus within three years, with an 84% probability of being in the black within the next decade.

Paul McGlone, head of employer advice at Aon Consulting, said: "This is great news for pension scheme sponsors in the UK, as it shows that deficits are once again expected to resolve themselves without the need for additional action.

"However, companies need to consider more innovative ways than cash contributions for funding pension schemes."

According to Aon, employers are in danger of contributing too much into pension plans and creating future disputes with scheme members over the application of surpluses."

Mr McGlone said: "The likelihood of future surplus for each employer is very different and is dependent not just on the current deficit, but on the investment and contribution strategy being pursued.

"A new problem starting to emerge in practice is that of an unrecognisable accounting surplus. With an estimated 80% of UK pension schemes now closed to new members, and up to 15% closed to future accrual, the opportunity to recover surplus can be limited.

"As schemes mature, trustees may target a higher level of funding than is really required and many organisations could find themselves in a situation where they have paid pension contributions that were actually unnecessary, but they cannot recover or recognise them."