Most defined benefit pension schemes 'losing money'

Around three-quarters of workers with guaranteed pension payouts are investing in funds which are losing money, experts revealed today.

The Pensions Board warned that 75% of defined benefit schemes were still in the red at the end of last year even though risk-taking financial managers made strong gains last year.

Launching its annual report for 2009, the board warned that despite good returns for almost all pension plans in 2009, concerns existed over how the positive results were achieved.

“Data shows that the level of investment risk being taken is still very high,” said chief executive Brendan Kennedy.

“Irish pension schemes suffered serious losses between 2007 and early 2009 because of the substantial investment risks being taken.

“The lessons of the past are clearly still not being applied today. Investment strategies must focus on the risk as well as the return.”

Mr Kennedy said those tied into defined contribution schemes also faced danger.

“Recent stock market losses show the ongoing risks of this approach,” he said.

“It is difficult to avoid the conclusion that the good investment returns of 2009 are a result of the same strategies that caused much of the recent losses and that the chances of further losses are therefore too high.”

The report revealed 169 suspected cases of deduction and non-remittance of pension contributions by employers in the construction sector were reported to the board last year.

Tiarnan O Mahoney, chairman of the Pensions Board, said where compliance failed to occur, the board moved swiftly to take criminal action.

“I have previously highlighted the board’s grave concerns about instances of deduction, but non-remittance, of employee pension contributions under the Construction Workers Pension Scheme,” he added.

“The board regards this misappropriation of employees’ monies most seriously and we continue to pursue these cases as a matter of priority with a focus on restoring the monies to the scheme.”

Mr O Mahoney also welcomed the Government’s publication of the National Pensions Framework in March and claimed it represented a significant milestone in pensions policy.