IRELAND - John Feely, chairman of the Irish Association of Pension Funds (IAPF), has offered a word of warning to those planning saving for retirement, following a survey which shows total assets of Irish pension funds to have fallen to e43bn this year from e50.6bn at the end of 2001.

Losses in global stock markets are blamed for the decline in Irish pension fund assets, but in spite of struggling equity markets, allocation to the asset class remained high in 2001.

The IAPF’s annual asset allocation survey for 2001 shows that at the end of December 2001, 64.6% of the pension fund assets were held in equities. Exposure to the Irish equity markets fell to 15.7% in 2001 from 18.7% in 2000, but holdings in US equities rose from 13.9% in 2000 to 16.3% in 2001. Euro-zone holdings increased slightly from 14.5% to 15%. Investment in Japanese equities slipped to 2.8% at the end of 2001.

Explains Feely: “historically, investment in equities has provided the best return over the long term. Investment in equities has been a major factor contributing to the growth in Irish pension assets from e12bn just 10 years ago to their current level.”

But, warns Feely, returns from equities in future may not be as high as those achieved in the past.

“Because of increased life expectancy combined with the likelihood of lower returns and interest rates, we need to look at a more flexible approach to retirement. It may be desirable from an economic and social perspective to encourage people to continue to work, full time or part time, into their 70s if they wish rather than setting an arbitrary retirement age of 65. The recent trend towards early retirement is not likely to be affordable in the future.”

Feely added that those in occupational pension schemes should seek advice as to whether they need to top up their pension through Additional Voluntary Contributions (AVCs).

“The reality of changes in pensions economics and demographics is that individuals are going to have to take more personal responsibility to make sure that they have adequate provision for retirement rather than relying on the State or their employer to ensure this.”