Strong equities bolster Irish pension scheme funding
Irish pension schemes saw their funding positions improve over the course of last month as equities produced strong gains, according to consultancy data.
LCP said the funding level of a typical defined benefit (DB) scheme in Ireland had increased by about 1.4% in May, as assets grew faster than liabilities.
While liabilities increased by 1.2% in the month for sample DB schemes in LCP’s study, assets grew over the same period by 2.6%, the firm said.
Meanwhile, Aon Hewitt said its Managed Fund Index – which includes traditional Irish pension managed funds – increased by 2.72% in May, while the index has returned 6.05% since the start of the year.
Cathal Fehily, investment consultant at Aon Hewitt, said: “Irish defined benefit pension schemes will have seen their liabilities rise again in May given the fall in core euro-zone government bond yields.”
But strong asset performance in the month should compensate for this increase in liabilities, Fehily said, with schemes generally seeing a small improvement in their funding levels.
LCP said the best pension fund performers in the month were defined contribution (DC) schemes with a high allocation to growth assets.
Pension fund investments in global equities increased by almost 4% last month, it reported.
Long-dated euro-zone bonds with AAA ratings also rose in price in May, it said, with bond yields falling for the fifth month in a row.
Aon Hewitt said global equity markets rose in May, with the FTSE All World Index up 3.9% in euro terms.
Japan was the best performing region in euro terms, while the FTSE Japan Index returned 5.8%.
Fehily said equity markets strengthened on the expectation the European Central Bank would loosen monetary policy further following its meeting on the 5 June, as it tried to spur higher inflation in the region.
“Euro-zone government bonds also benefited from this expected policy, as government bond yields moved even lower over the month,” he added.