GLOBAL - Pension funds are most concerned about the financial instability potentially caused by PIGS states - Portugal, Italy, Greece and Spain - the latest Global Pension Survey (GPS), by Tilburg University, IPE and the European Pension Academy, has found.

Further, 22% of respondents believed that Greece should be excluded from the euro.

The survey also showed that schemes were becoming increasingly pessimistic about their ability to meet the needs of its scheme members, with only 55% optimistic they would be able to cover all financial needs, down by 18% compared to two quarters ago.

The survey also ranked concerns about the cover ratios and solvency levels as most important to respondents, followed by managing risk and the ability to continue focusing on long-term investment strategy.

Of external concerns, risks posed by interest rates were seen as most important, while longevity was viewed as the least concerning issue of four.

Additionally, pension funds believed that emerging markets would become increasingly important to the investment universe over the next three years, while almost three-quarters (71%) said European financial stability was threatened by Spain, Greece and Italy.

A further 69% believed that if the financial situation of Italy and Spain were to worsen in the future, this would have a detrimental impact on the performance of their scheme assets.

Over two-thirds of respondents said countries in northern Europe are left to pay the price for problems their southern neighbours face. Despite this, (69% said the single currency had brought the eurozone more prosperity, while only 44% thought that the euro had positively impacted scheme returns.

The GPS, now in its third quarter, surveyed over 60 pension funds on their attitudes in July. A more detailed survey of results will be available in the September issue of IPE. Also see for further information.