IRELAND – The value of the average Irish pension fund increased by as much as 17% over the course of 2012, aided by strong equity performance, according to figures from Mercer.

The consultancy's predictions are roughly in line with results from pension managed funds, which, according to figures from Rubicon Investment Consulting, saw returns of 14.4% over the 12 months to December.

Of the 10 asset managers monitored, Standard Life Investments saw the strongest performance over the period, returning 17.5%.

Zurich Life, the sample's worst-performing manager, still returned 12.9% and remains the strongest manager over a 10-year period, outperforming the decade-long average by 1.4 percentage points.

Commenting on the growth, Mercer senior consultant Patrick McKenna credited equity portfolios and noted that global stock markets had risen by 15% over the course of 2012, doubling in value since their lowest point in 2009.

"Furthermore, euro-zone sovereign bond markets also performed strongly, with average returns also ranging from 15% to 20%, resulting in further gains for pension funds," he added.

However, McKenna said some of these gains were offset by the decline in euro-zone bond yields, particularly German sovereign debt.

The country's benchmark 10-year bond started off 2012 returning 1.9%, but dipped as low as 1.29% during the last day of trading last year.

"As a result, the aggregate reported deficit in pension plans sponsored by Irish quoted companies and Ireland's largest semi-states increased by an estimated €0.8bn to €5.4bn by the end of 2012," the Dublin-based actuary said.

Liam Quigley, partner at Mercer, predicted this would result in de-risking being an important topic for discussion among trustees.

"At a minimum, this is likely to entail measures to reduce risk, including a significant increase over time in secure bond holdings, generally at the expense of equity investments," he said.

"However, it may also extend to consideration of other risk management options such as the outright settlement of benefit entitlements through annuity purchase."

The sovereign annuity market has yet to attract the interest many expected, although insurer Irish Life said sovereign products remained attractive despite the lower than initially expected yield.

The company earlier this week announced that it had completed its first buyout with the products.

Trustees for the unnamed scheme, valued at around €20m, purchased a policy with a blend of sovereign and regular annuities, the company told IPE.