Safety first as fund trustees switch €2.5bn into bonds to reduce risk
Published 23/03/2011 | 05:00
PENSION fund trustees have switched €2.5bn out of equities and into bonds in the past year in a bid to lower the risks for schemes.
But despite the big shift into safer bonds, €6 out of every €10 invested in private sector defined benefit schemes is still invested in equities, according to a survey by the Irish Association of Pension Funds (IAPF).
The assets of private sector pensions have grown to almost €75bn, although this is down on the level it was in earlier years.
The level of investment in shares here is in contrast to countries like Britain and the Netherlands, according to director of policy at the IAPF Jerry Moriarty. Many defined benefit schemes are moving to "de-risk" their investments, with a notable shift from equities to bonds being part of that.
However, the IAPF said that schemes also need to be able to generate reasonable returns if the employer and employee contributions required to fund them are to remain sustainable.
Some eight of 10 company pension schemes are in deficit, with many pulling back on promises to pay two-thirds of the final salary of a worker with 40 years' service.
Mr Moriarty warned: "The shift to more conservative investment options will potentially lower the long-term return, and this could be further dragged down by the proposed pension levy, should the new Government choose to take this retrograde step."