Actuaries warn of pension funds 'risk'
Published 22/12/2010 | 05:00
A MUCH-celebrated scheme allowing Irish pension funds to pile into Government bonds is not without risk, the Society of Actuaries has warned.
The comments followed the Budget announcement of an investment programme to make it easier for pension funds to buy government debt.
The scheme has been much celebrated since it gives pension funds access to the high interest rates offered by Irish Government debt.
It could also dramatically reduce the black holes in pension funds since they will be allowed to use the high-yielding Irish bonds to calculate how much they've set aside to pay members.
But the Society of Actuaries last night warned that the so-called "sovereign annuity" scheme was not a silver bullet for the crisis facing the pensions industry.
"There are risks attached to the potential reduction in pension costs and the Society would have concerns if those risks were not addressed," the Society said in a statement.
The actuaries stressed that the "level of risk implied" by the current interest rates attached to certain sovereign bonds "cannot be ignored".
While acknowledging that trustees would not be "obliged" to buy Irish government debts, the Society also said trustees could face "pressure" to invest in high yielding Irish government bonds.
"Guidance should be provided to trustees on the considerations that they should take when deciding whether, and, if so, to what extend, they should avail of sovereign annuities," the Society stressed.
However, the Society said they "welcomed" the introduction of sovereign annuities as well as the Government's commitment to monitor the market.