IRELAND - Irish pension fund deficits are likely to have reduced by approximately one-third since March thanks to improved market conditions, but trustees are still being advised by Mercer to focus more on strategic than on operational issues.

An update on market activity by the consulting firm suggests deficits have fallen by €8-10bn over the last two months as global and European stock markets have rallied by approximately 25% since the low earlier this year, alongside favourable movements in the discount rate of bonds used in the calculation of pension liabilities, though gains have been sparked by the prospect of inflation.

Mercer has suggested trustees might want to consider derisking pension schemes, while markets rally, as "significant deficit positions remain and will need to be tackled, regardless of future investment returns".

More specifically, Noel Collins, senior investment consultant at Mercer Ireland, said most schemes now require a thorough review of their benefit and contribution levels, and argued trustees need to dedicate more time "to strategic rather than operational issues" as well as enhance their internal governance structures.

"The magnitude and speed of these recent market developments serve to highlight the need for Trustee groups to be closer to their strategic decisions and to invest the time and resources in managing these decisions," said Collins.

Mercer noted the key cost drivers for pensions - increasing life expectancy and low interest rates - will continue to influence schemes heavily so closer scrutiny of investment strategies is required.

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