Majority of Irish schemes change investment strategy, says Aon Hewitt
IRELAND - The overwhelming majority of Irish pension funds have changed their investment strategy in recent past, according to Aon Hewitt - contradicting previous findings by rival consultancy LCP that asset allocation had remained largely untouched at the end of 2010.
Aon Hewitt's 2011 defined benefit (DB) pensions survey also found that an overwhelming majority of scheme sponsors do not intend to fund the 0.6% pension levy, likely leading to benefit cuts for members.
The consultancy noted that 90% of pension funds surveyed had recently changed their investment strategy, standing in contrast to findings by consultancy LCP, which recently reported only marginal adjustments to both equity and bond exposure in scheme portfolios.
Rachael Ingle, joint managing director of Aon Hewitt in Ireland, explained that the number of problems facing DB schemes was mounting.
"Continually improving longevity, persistently low annuity rates, an uncertain legislative environment and the ongoing fallout from one of the most severe stock market crashes of all time are just some of the significant challenges facing the pensions industry at present."
She said that she welcomed indications by the government that the funding standard would be reinstated by the Pensions Board soon - despite their survey confirming that three-quarters of schemes did not currently meet minimum funding requirements.
She highlighted that the introduction of the pensions levy, announced by the government in May, strained relationships "at a time when cooperation between both parties is the only way to ensure a sustainable pension future for employees".
Aon Hewitt's data confirmed previous findings by the Irish Association of Pension Funds (IAPF) that scheme sponsors would not assist in paying the levy. The IAPF subsequently warned that the levy could lead to benefits falling by as much as 10%, while members of the opposition Fianna Fáil party have accused the government of using the revenue to improve the appearance of exchequer tax revenue.
It follows renewed calls by independent TD Shane Ross for the levy to be replaced with a direct tax on asset managers.
During leader's questions last week, Ross challenged the government to make the asset management industry was in "huge need of reform" and "an accident waiting to happen".
"What we need is for the Government to give us a pledge," Ross said, addressing Irish deputy prime minister Eamon Gilmore directly, "that it will move immediately to ensure the Irish pensions industry is not an industry which continues to make managers rich and to make pensioners poorer."
Gilmore countered that the Department of Social Protection had recently launched an investigation into the level of fund charges and that its results in December would "inform" any further decisions by the government on the matter.