Pension deficits drop to €5.3bn

DEFICITS at the country’s biggest defined benefit pension schemes in the public and private sector fell from €13.3 billion in September 2010 to €5.3bn at the end of March.

Figures released yesterday by Attain Consulting show that the total accounting deficit of defined benefit pension schemes of Irish- based plcs quoted on the Irish Stock Exchange and the 11 largest semi-state companies with funded pension schemes, has decreased from an estimated €6.4bn in December to €5.3bn in first three months ended March 31, 2011.

The Attain Pension Accounting Index by the company Attain estimates that during the quarter, assets decreased by approximately 1% but the value of the companies’ liabilities fell by an even greater amount due to favourable movements in bond yields.

The funded ratio of assets to liabilities was 82% at March 31, 2011 up from its level three months previously of 79%, and a significant improvement from the low point of 63% just last September.

“When compared to the position 12 months ago when the estimated total deficits were €8.8bn, the picture looks significantly better. Deficits have also more than halved when compared to the all-time low point of €13.3bn in September 2010. Although a sustained recovery in asset values and the easing out of bond yields have been the main drivers of the improvement in the position, the effect of benefit changes arising from pension scheme benefit reviews in several companies is also coming through in the numbers,” the survey states.

Director of Attain and a consulting actuary Maurice Whyms said the turbulence in the markets due to the Japanese earthquake disaster might have been expected to cause some deterioration in the position, but a rise in bond yields helped improve the overall picture.

Attain has conducted regular studies of the defined benefit pension plans sponsored by Irish companies.

“While the improvements outlined provide some very welcome relief to the balance sheets of companies with defined benefit schemes, many schemes still face significant challenges including requirements to make greatly increased cash contributions over the coming years,” added Mr Whyms.