Irish workers' pensions were the worst performing funds in 2008 of any in the developed world with losses of up to 35 per cent being inflicted on some, according to new figures obtained by the Sunday Independent.

As the country faces a major pensions crisis in 2009 with a number of high-profile company schemes expected to collapse by June, the Government looks set to have to bail out or supplement schemes that are now in deficit.

The news will strike fear into thousands of workers nearing retirement age who have seen their personal funds decimated in recent months.

According to the new figures from the OECD, Ireland's pension crisis is now worse than the United States, Britain, Japan, Canada and even Iceland, whose bank sector had to be rescued. In real terms, the value of Irish funds fell by 33 per cent during the first 11 months of last year.

On Friday, Hewitt Consultants, in their latest report, said Irish funds dropped by three per cent alone in December alone.

The sharp decline of Ireland's pension performance was blamed on the level of exposure to shares and experts have said that to protect people's retirement funds, Ireland must further diversify where it invests its money. For several years, Irish equities were among the strongest performers on the markets but they were hit hard during 2008 and that fall has hit pensions badly.

To illustrate, for every €100,000 a person had invested at the start of 2008, it is now worth between €65,000 and €70,000. In a double whammy, thousands of people who made additional contributions to their funds have also seen them badly affected.

For example, a colleague who is retiring in six years time received his statement last week for the AVCs (additional voluntary contributions) he has been making for the last 20 years or so to supplement his pension. In July 2007 his savings invested with a leading pension fund stood at €119,900, last July they had shrunk to €92,000 including the €4,000 he had put in during that year. His fund is now probably down to a fifth of its July 2007 level. And this comes at a time when he should be converting from a fund based on the stock market and equities into a more secure cash fund picking up deposit interest. Now he doesn't have that security and must ride out the next few years wondering if the market might recover or a substantial part of his pension proviso will be totally lost. In the last couple of years he has already been called to make substantial extra contributions to his main pension provider which, like all company-based defined benefit schemes, is under severe financial pressure.

In total, defined-benefit pension schemes, where employers carry the investment risk, have lost a third of their value in the last 12 months amounting to €20bn. Investment losses are also serious for members of defined-contribution schemes who bear all the investment risks.

Ronan Smith, a pensions expert, said Ireland's woes are incredibly serious and that drastic action is now required from government and from employers to ensure the safety of pension funds.

"The problem was that when we joined the euro we didn't spread out our dependence on Irish equities, as we should. For a while those Irish equities were doing well but we got hammered when it emerged there was a lack of funding. Now what must happen is that government and the employers must ensure any deficits are met and honoured," he said.

The pension crisis was quantified in a leaked cabinet memo sent by Social Welfare Minister Mary Hanafin in late November which warned that up to 50 per cent of schemes could collapse during 2009 if trends continue. She warned of the threat of thousands of Irish workers seeing their retirement funds wiped out within six months and said urgent action was now required.

At present, around 250,000 Irish private sector employees and 90,000 pensioners are in generous defined-benefit schemes, where the employer has to guarantee the end amount paid to the employee. Over 90 per cent of defined-benefit schemes -- the most common type of pension scheme in Ireland -- are expected to be in deficit when they report on their solvency to the Pensions Board.

Due to the difficulties in funding defined benefit schemes, many leading companies have in recent years closed these schemes to new entrants in favour of less expensive defined contribution schemes, where the onus is on the individual not the employer to ensure the safety of the fund.

- DANIEL McCONNELL Chief Reporter