Aon Consulting's latest Aon200 index records have shown that the combined pension funding position for the 200 largest UK privately sponsored defined benefit (DB) schemes have improved by £16bn to a deficit of £62bn.

The firm believes there are signs that this figure may be the most stable in some time, with previously abnormal market conditions beginning to clear, paving the way for companies to plan for the future. The funding position, which is based on both the value of the assets and of the liabilities, could be improving because of stabilising yields for what could be a new long-term norm, according to Aon.

Marcus Hurd, head of corporate solutions at Aon Consulting, said: "The era of uncertainty for final salary pensions liabilities is coming to an end. The real issue of pensions deficit remains, but if the goalposts are at least standing still then there is an increased chance of hitting the target. Dealing with the remaining pension deficits, whether accounting, funding or buyout, will have to be met by either strong asset performance or yet more pension contributions.

"This is not an easy challenge, but at least now companies can plan for the future. The smart companies will be monitoring the markets closely and using current, market conditions as an indicator to lock into more favourable positions in the future."

Meanwhile, the FTSE350 has seen increasing pension fund deficits despite an equity market rally, says Mercer.

The financial consultant has recorded the FTSE 350's aggregate pension scheme deficit at 30 September 209 at an estimated £140bn, giving an overall funding level of 77 per cent.

Mercer's quarterly Pension Update, which analyses the aggregate pension commitments for the FTSE 350, also predicts that, if credit spreads were to fully revert to historical levels without further market recovery, deficits could increase by £60bn.

Dr Deborah Cooper, head of Mercer's retirement resource group, said: "It was always one of the more perverse side-effects of the credit crunch that pension deficits in company accounts appeared to reduce. While it is obviously not good news that disclosed deficits are again on the increase, at least this will bring the deficits shown in company accounts back more into line with pension fund trustees' own assessments. This should facilitate more constructive debate and co-operation between companies and trustees regarding pensions, rather than the differences in calculation methods muddying the waters and diverting attention from the true scale of the problems that need to be tackled."

Cooper added that companies and trustees must be "kicking themselves" for not taking advantage of opportunities back in 2006/07 "to bank the gains in funding levels that they enjoyed".

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