Pension fund deficits soar in wake of ‘perfect storm’

THE holders of direct benefit pension plans are in the midst of a “perfect storm” as 18 months of financial turmoil take a devastating toll on pension funds, a report has suggested.

Independent analysis by the accountancy firm, Lane Clark and Peacock (LCP) has revealed how pension deficits at the top 25 companies quoted on the Irish Stock Exchange have more than doubled in the last 12 months to €4.5bn.

The report also goes on to reveal a burgeoning pension black hole at four of the country’s top state companies.

The LCP analysis shows how the pension deficits at the ESB, An Post, CIÉ and RTÉ have ballooned to €4.5bn and that the state companies now hold just 60% of the assets required to meet the pension benefits already earned by members.

The report’s authors go on to suggest the level of underfunding of pension liabilities is “quite staggering” and adds that the pension crisis facing state-sponsored bodies is even greater than private sector companies.

The report suggests that without extraordinary investment returns these deficits will persist and may have to be met by the taxpayer, future profits or by reducing members’ benefits.

The analysis of the 29 companies also shows that, despite recent rallies in the equity markets, pension deficits have more than doubled over the 12-month period to the end of October this year.

According to LCP Ireland, the key factors that have driven this dramatic rise in pension deficits are falling equity values late last year and early this year and falling corporate bond yields.

LCP said the rate of increase in pension deficits over the past 12 months shows that many companies have not put measures in place to reduce pension risk.


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