Irish Pension fund assets up 15pc in 2012
Pension fund assets performed strongly in 2012, with fund values up an average of 13pc to 17pc during the year, according to pension experts Mercer.
“Global equities were up by 15pc during 2012, and have almost doubled in value since their lows of March 2009” according to Patrick McKenna, senior consultant with Mercer’s Financial Strategy Group. “Furthermore, Eurozone sovereign bond markets also performed strongly, with average returns also ranging from 15pc-20pc, resulting in further gains for pension funds”, commented McKenna.
However, pension scheme liabilities have also grown materially over 2012, due to the continuing decline in the yield available on ‘safe haven’ German government and other high quality sovereign and corporate bonds. “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” said McKenna. “In this regard pension plan trustees and sponsors share an objective with our political leaders to see an early resolution to the Eurozone sovereign debt crisis,” he added.
According to Liam Quigley, partner, Mercer: “The crisis in pension funding has been ongoing for four years and needs to be resolved”. Looking into 2013, he said that addressing deficits and managing risk will be the key focus as companies look to put their pension schemes on to a sustainable footing for the future.
“Everything will be on the table, including benefit reductions and contribution increases. From a risk management perspective trustees and companies will need to look at the full range of options available to them. 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. However it may also extend to consideration of other risk management options such as the outright settlement of benefit entitlements through annuity purchase. In particular sovereign annuities should give further options to both pension scheme sponsors and trustees who are looking to manage risk in this way,” added Quigley.