The position of Irish pension schemes has improved by between €8 and €10bn since the middle of March, according to pension experts Mercer.
The was due to a combination of rising stock markets and favourable movements in the discount rates used to value pension liabilities, Noel Collins, senior investment consultant with the firm, said.
There had been a substantial recovery in global and European stock markets. They had rallied over 25% from the low levels earlier this year. Markets had been boosted by initial signs of the much talked about ‘green shoots of recovery, and the decisive actions on interest rates and stimulus packages by governments and central banks.
At the same time, long-term interest rates had moved upwards because markets now saw a possibility of inflation returning to the main economies over the next few years.
However, it remained to be seen whether the improvements were sustained into the second half of this year.
He also said that the ‘key cost drivers’ for defined benefit pension schemes were increasing due to life expectancy and low interest rates. This would continue to be the case.
Most schemes required a thorough review of benefit and contribution levels, as well as continuing to address the risk levels.
Market rallies such as this provided an opportunity for schemes to consider a process of de-risking their portfolios, Mr Collins said.
He stressed the need for Trustees to allocate more time to strategic rather than operational issues and recommended that Trustees should enhance their internal governance arrangements.
The magnitude and speed of these recent market developments serve to highlight the need for Trustee groups to be closer to their strategic decisions and to invest the time and resources in managing these decisions.
Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing.
Mercer’s investment services include investment consulting and investment management. Mercer’s 18,000 employees are based in more than 40 countries.
Article courtesy of the Evening Echo newspaper.