Saturday 20 April 2019

Our pension losses are highest in the world

Charlie Weston Personal Finance Editor

Pension funds in Ireland notched up the biggest losses in the developed world last year, according to a stark new report.

Retirement funds here collapsed spectacularly because they are over-exposed to shares and property.

The report from the Paris-based Organisation for Economic Co-operation and Development (OECD) details the massive losses notched up by private pension funds.

The deficits have sparked new fears that those nearing retirement may have to radically scale back their income expectations.

Nearly a million people here are between the ages of 44 and 64, according to the Central Statistics Office. This means a pension timebomb is building, with a quarter of the population within 20 years of retirement.

The revelation came as the Government moved to bail out a number of struggling public sector pension funds by transferring them into the National Pensions Reserve Fund. Fourteen state and university pension schemes -- all of them underfunded -- are covered by the move, which provoked a Dail row yesterday over a claimed lack of proper consultation with opposition parties.

The move will guarantee the pensions, but comes at a future price to the taxpayer. The schemes currently have assets of €1.75bn, but liabilities of nearly double that amount, at €3bn.

However, the Government cannot afford to take over or guarantee private funds.

The OECD report revealed that losses have been more severe in Ireland than those in the US, Britain, Japan, Canada or Iceland. The average Irish pension fund lost more than a third of its value in 2008.

Last year was the worst on record, with the losses so severe that up to 90pc of company pension schemes are in deficit.

Although some of the €30bn deficit has been recovered, almost all private pensions are nursing enormous losses.

The fact that pension funds here are more heavily invested in the Irish stock market means that the losses have been larger than elsewhere.

And the OECD points out that the destruction of pension wealth is more keenly felt here because private pensions account for one third of retirement income. This compares with an average of less than 20pc for other OECD countries.

More pension schemes should switch the funds invested for those nearing retirement into safer assets such as bonds, author of the report Edward Whitehouse said. Yesterday's OECD report also shows more than 30pc of Irish pensioners live in poverty. This is the third-highest among OECD countries.

The State pension is €230 a week for those who have made sufficient PRSI contributions.

A spokeswoman for the Department of Social and Family Affairs said last night that since 2005, the year to which the OECD figures pertain, the contributory state pension has increased by 28pc and the non-contributory pension by 32pc.

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