Benign conditions, including higher bond yields and strong equity and property markets, have boosted the health of Irish defined benefit pension schemes in the first quarter, according to Mercer Investment Consulting.
According to Mercer estimates, average funding ratios have improved by between 10% and 15% from the end of 2005 to 31 March 2006.
“The improvement in funding over
the first quarter 2006 represents by far the most significant rise we have witnessed over any single quarter since 1999 and sees the ratio at its best level since mid 2002,” said Mercer senior investment consultant Michael Curtin.
A substantial rise in long-term bond yields (falling liabilities) has been largely responsible for the improvement in funding.
“Defined benefit pension funds are increasingly recognising that bonds may provide a better match for defined liabilities.” The consultants noted that against this backdrop, many schemes might wish to re-examine their strategic asset allocation.