Pension fund losses lead to workers deferring retirement

ALMOST €8 billion has been wiped off the value of Irish pension funds so far this year, prompting workers to consider holding off on retirement.

The Irish Association of Pension Funds (IAPF) said in addition to this drop, the value of Irish funds fell by fall in five years.

Pension scheme assets dropped to €86.6bn last year from €87.7bn at the end of 2006.

The IAPF estimate that Irish pension funds are down about 9.5% so far this year. It said workers are increasingly thinking about holding off on retirement because of poor value to be had in pension funds at the moment.

IAPF chairman Patrick Burke said while significant losses have been recorded since the start of the year, a study conducted by the association indicates that pension fund trustees have been actively reducing investment risk.

“Despite recent falls, the total value of assets managed by Irish pension funds has almost doubled from €44.8 billion in the five years since the end of 2002 reflecting strong investment returns in the years prior to 2007 and significant contributions following the market turmoil of 2001/2002, improved mortality and lower long term interest rates.

“Recent market falls have been very worrying for pension scheme trustees and will present funding standard and contribution rate difficulties for some. Nevertheless, since our adoption of the single European currency, Irish trustees have gradually moved to reduce their concentration in the Irish equity market down to a weighting of just over 8% at the end of 2007.”

The survey also shows 20% of all pension scheme assets are managed on behalf of defined contribution schemes, representing a significant increase in defined contribution assets under management.

“While the defined contribution population can generally afford to take a longer term view of investment risk, many defined benefit scheme trustees and employers are pressurised by accounting and funding standards to take investment risk off the table and we are seeing the evidence of this under a number of headings in the IAPF Asset Allocation Survey for 2007.”