Irish companies' pension deficits remain level despite volatility
IRELAND - Ireland's listed companies have seen only a €100m increase in pension fund deficits despite volatile markets over the past 12 months.
According to figures released by Mercer, the estimated deficit for 2010 stands at €4.5bn compared with €4.4bn at the end of the previous year, resulting in an average 77% funding for ISEQ companies' schemes.
Additionally, pension liabilities accounted for 40% of the leading companies' market capitalisation.
Patrick McKenna, senior consultant at Mercer, cited low corporate bond yields for the lack of improvement over the last year, despite rallying equity markets returning 11% on average.
"When these two factors are combined, the net result is that the overall funding position remained broadly unchanged over the year," he said.
Despite the unstable performance of bonds, the consultancy estimated the schemes' funding ratio had improved by 1 percentage point over 2009.
The country's Pensions Board last year suspended the funding standard in anticipation of a new defined benefit framework, meaning underfunded schemes have not needed to submit recovery plans over the last few months.
Once the guidelines are reinstated in July and the new framework is unveiled, McKenna predicts further upset for schemes.
"While these changes are expected to give companies and trustees additional options, they may also introduce additional risks that will have to be considered by stakeholders," he said.
"In many cases, difficult decisions relating to benefit provision, funding and investment strategy will have to be taken to construct recovery plans that are both equitable for members and sustainable into the future."