Irish pension schemes could be exposed in 2020

Irish pension trustees have been warned their schemes could be exposed if there were to be a correction in the equity markets this year.

Irish pension schemes could be exposed in 2020

Irish pension trustees have been warned their schemes could be exposed if there were to be a correction in the equity markets this year.

Analysis by Mercer found liabilities for defined benefit (DB) pension schemes in Ireland increased significantly due to falling yields in 2019 but were offset by strong asset performance.

Peter Gray, Corporate Consulting Leader and Principal, Mercer Ireland said 2019 could have looked very different had it not been for the strong performance in equity markets for schemes that were not well matched.

"I would encourage sponsors and trustees to consider whether their schemes are exposed if there were to be a correction in the equity markets over 2020," he said.

While deficits have remained stable the cost of funding DB schemes will have increased due to lower yields.

At the end of August, yields reached their lowest-ever level, driving pension scheme liabilities up approximately 20% compared with the start of the year.

From August onwards, yields rallied, causing pension scheme liabilities to finish the year around 10% higher than starting level.

The industry continues to wait for the implementation of the European pensions directive, IORP II that will lead to additional governance, member communication and disclosure requirements and ultimately increase the cost of operating a pension scheme, Mercer said.

“With some 10,000 pension schemes in Ireland, it is perhaps inevitable that a more onerous and expensive governance framework will cause a reduction in the number of schemes,” Mr Gray said.

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