Accounting deficits within Irish defined benefit (DB) schemes have increased by €3.5bn over the course of 2014, according to Mercer, despite continued positive investment returns.
Sean O’Donovan, head of DB risk at the consultancy, said that it would come as a “disappointment” that the funding shortfall within company funds had increased despite continued asset growth.
“Despite the recovery, sustained pension deficits remain an issue and is becoming an area of focus for companies who seek ways to reduce or cap their liabilities,” he added.
Mercer said that the average DB scheme had seen assets increase by 4% over the third quarter, and that a decline in deficits would have been expected after the funding situation improved by €1.8bn over the course of 2013.
The falling government and corporate bond yields in recent months, however, had seen a 20% increase in liabilities, offsetting any gains in assets under management.
The consultancy said that accounting deficits stood at an estimated €5.4bn at the beginning of 2014, rising to €8.9bn at the end of September.
“Bond yields are at historic lows and while they do provide a broad match for liabilities, the timing of switching out of equities to these assets remains a key issue for employers and trustees,” O’Donovan added.
“Schemes need to maximise opportunities as and when they arise and put in place plans to capture funding level improvements.”