Pension crisis could force people to work until they die

THE under-provision of pensions could mean many people may have to work until they die, according to KBC Asset Management.

“Pension under-provision in Irish pension funds is a looming crisis,” according to Séan Hawkshaw, chief executive of KBC Asset Management, one of Ireland’s leading asset managers.

The numbers over retirement age are increasing, there are now around half a million over 65 in Ireland, by 2050 this will have grown to 1.25 million.

He said at the same time that older people have become healthier, their pension funds have become distinctly less healthy.

“Unfortunately, unless something radical is done, many people may have to work until they die.

“With four in every five pension schemes under-funded, trustees are looking at new ways to add value while also managing the different kinds of risk associated with pension funds. Investment manager risk is one such risk confronting trustees and KBCAM are putting forward an innovative solution to deal with this,” he said.

Mr Hawkshaw said one of the key elements of investment manager risk is the investment manager style of investing, as it dictates what sort of investments the manager will favour or avoid.

“Because different economic and market conditions favour different styles, this means any one style can be in or out of favour - sometimes for a number of years. For trustees who do not want to expose themselves to this risk and want to reduce dependence on single managers, there are a number of cost-efficient solutions. In the Irish market, ‘consensus funds’ are one way of approaching this, (where the fund aims to replicate the average performance of 16 managers in the managed fund survey). However, we believe there is a superior alternative to these funds by using the ‘Manager of Managers’ concept,” he said.

Speaking at the launch of the KBC/NT range of “Manager of Managers” funds, Mr Hawkshaw said: “While the use of a number of specialist managers has definite advantages, it creates the hugely onerous task of finding, hiring, blending, monitoring and (when necessary) firing these specialist managers. This can be a daunting task for Trustees and investors, not to mention when the whole process is triggered again if one or a number of individuals decide to leave the fund management house. One solution is to transfer these tasks to a group of full time manager selection professionals or ‘Managers of Managers’ which gives all the benefits of a more sophisticated approach with none of the headaches.”