Pension funds dive 20%
These latest statistics reflect the reality that global stock markets fell by 30% in 2002. Tom Murphy, of Mercer Human Resource Consulting said the size of the fall was “extreme.”
It also came on the back of negative returns in the markets in each of the two previous years in 2000 and 20001 as well.
Pension experts have warned that thousands of people hoping to retire in the next few years face huge write downs in the pensions retirement schemes. In particular individuals who took out their own plans in the late 1980s are at risk as are those who opted for endowment mortgages.
The reality is that many will face a far bleaker retirement than they envisaged, as equity returns and interest rates combine to seriously undermine the overall value of their pension packages, experts have warned.
As a result of markets bombing last year, none of the major Irish pension funds made gains.
The best performance was generated by BIAM whose fund fell 13.1% over the year while the worst hit was KBCAM which tanked at 24.4% year on year.
In a separate analysis of the outturns consultants Watson Wyatt observed that over the five years to the end of 2002 managed funds returned just 2.8% a year.
That compares to inflation over the same period of 3.9% per annum.
These low levels of return have significantly reduced funding levels for most Irish pension funds. In addition to falling equity markets, the reduction of long-term interest rates has increased the cost of pension provision and will have threatened the solvency position of many funds, said Joseph O’Dea of Watson Wyatt.
