Tuesday 24 October 2017

Deficit levels mirror 2009 with €4.5bn black hole

Charlie Weston Personal Finance Editor

THE pension plans of stock market-quoted companies have deficits totalling €4.5bn, a new report has found.

This is broadly unchanged from the figure for 2009.

Deficits as big as these will require sponsor companies and scheme trustees to make some tough funding decisions, compiler of the survey Mercer said.

Strong returns last year were wiped out by a fall in bond yields, in a development that left the deficits for quoted companies last year a similar size to the 2009 deficit level.

Mercer consultant Patrick McKenna estimates that the average defined benefit scheme operated by quoted Irish companies covers just 76pc of its liabilities.

"While investment returns were relatively strong over the year (typically around 11pc), falls in corporate bond yields resulted in an increase in pension schemes' liabilities.

"When these two factors are combined, the net result is that the overall funding position remained broadly unchanged over the year," Mr McKenna said.

Mercer estimated that accrued pension liabilities of around €19bn represent 40pc of the total market capitalisation of ISEQ companies at December 31, 2010. Given that some companies have little or no defined benefit pension obligations, the likelihood is that such obligations are among the main financial risks for those companies that operate defined benefit pension schemes, Mercer said.

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