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Strong returns at Irish pension funds fail to offset liability increases

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  • Strong returns at Irish pension funds fail to offset liability increases

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IRELAND - Irish pension funds saw returns of nearly 7% in the first two months of the year, according to Aon Hewitt, but figures show funding levels still have not recovered from losses suffered over the past year.

Figures from a number of consultancies painted similar pictures of returns, with Rubicon Investment Consulting's preliminary February results for the average pension managed fund at 2.9%, identical to those from Aon Hewitt, with year-to-date estimates only 0.1 percentage points lower at 6.8% from Rubicon.

However, equity markets were expected to pull back in the short term, according to Darragh Gavin, investment consultant at Aon Hewitt.

"The global economic picture appears to be improving, but, given the large gains seen since the start of the year, much of this positive improvement may be priced into the market already," he said.

LCP's Investment Summary for the month calculated that returns for a hypothetical Irish scheme had not been sufficient to see funding levels return to last year's heights, with a 1.8% increase to 96.4% still meaning the 12-month average had seen a 3.6% decline.

The consultancy said: "During 2011, the funding level remained broadly stable until June, when a combination of falling asset values and falling German bond yields resulted in a sharp fall in the funding level.

"The funding level began to improve in September and has steadily increased since then."

Aon Hewitt's Gavin added that the low yields in core euro-zone countries had kept the value of liabilities high, with LCP estimating that they had risen by nearly 12% in the past year, with only a 7.8% rise in assets over the same period.

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