Irish roundup: Public sector pensions, IAA, managed funds
IRELAND - The Irish government has backtracked on plans to link public sector pension increases to the cost of living in an effort to reach a pay agreement with trade unions. Meanwhile, the Irish Aviation Authority has reported a pension deficit of more than €200m, and managed pension funds returned just under 1% in April.
In December 2009, Irish minister of finance Brian Lenihan argued in his budget that by linking post-retirement public sector pension increases to the consumer price inflation (CPI), instead of the existing earnings links, costs would be reduced by 20%. He also confirmed plans to "review the current arrangements and consider linking pensions to increases in the cost of living". (See earlier IPE article: Irish public sector turns to career average scheme)
However, it has now been confirmed that pension increases will remain linked to earnings rather than inflation until at least 2014.
In a clarification document on the draft public service agreement for 2010-2014 - known as the Croke Park agreement - facilitators from the Labour Relations Commission stated: "In the prevailing circumstances the government has clarified that no change in the current arrangements for the indexation of pensions for current public service pensioners and serving public servants will be implemented during the period of the Agreement".
The clarification document also revealed that discussions were expected to take place next year over the pensions of existing public service retirees and current public servants, in the context of the review of pay.
It added that discussions between the department of finance and trade union representatives relating to pension scheme arrangements for new public servants remain a separate engagement process. The government is proposing the introduction of a career average scheme for new entrants before the end of the year.The Irish Aviation Authority (IAA) has reported a deficit in its pension fund of €234m as of 1 January 2009, according to figures from its latest annual report.
The IAA revealed the actuarial valuation of the IAA Pension Fund in January 2009 "disclosed a pension deficit of €234m requiring a 48% funding level". This is an increase of almost €100m from the deficit of €146.6m reported at the end of 2008. (See earlier IPE article: IAA deficit almost trebles in 2008)
Trustees will consequently be required to submit a funding proposal to the Pensions Board in 2010, outlining plans to restore solvency.
The IAA also highlighted the recommendation of the Labour Court last year, after an industrial dispute with trade unions, that a 6% pay increase should be applied in two phases in 2011 "subject to a resolution of the pension funding issue, with any retrospection paid into the Authority's pension fund as a one-off cash injection".Irish group pension managed funds produced an average return of 0.9% in April, according to latest figures from Rubicon Investment Consulting.
The monthly survey of 10 managed funds showed Merrion Investment Managers produced the best return of 1.5%, while KBC Asset Management, Irish Life Asset Managers and Canada Life/Setanta followed close behind with a return of 1.2%.
The worst performer over the month was Aviva Investors with a return of 0.4%. The asset manager was also at the bottom of the group over a four-month period with a return of 4.9%. Managed pension funds on average produced a return of 6.8%, led by Irish Life with a figure of 8.3%.
Although the performance was also positive over a one-year period, at an average of 26.3%, the three-year returns were more disappointing with a return of -7.1%.
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