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Irish Pensions Magazine Autumn 2016
16
Advertorial
Expert Opinion
Preserving market gains a key challenge for Trustees
I
rish pension funds have been making a strong recovery
in value in recent years. This is clearly demonstrated
by the yield from the Stamp Duty levy on pension assets,
introduced in 2011. In the first year in which the levy
applied €77.1 billion in pension assets were subject to
the tax. In 2014 this was just under €100 billion and by
the time the final instalment of the levy was due in June
2015, Irish pension schemes had staged a remarkable
increase in size to €112.6 billion. This was some 46
percent higher than four years previously, reflecting
strong market returns as well as employer contributions.
In the last twelve months, both equity and bond markets
have continued to move up strongly. In particular bond
funds, both government and corporate, have enjoyed
the benefits of Central Banks easing monetary policy.
This has significantly underpinned returns with global
bond funds up 10% year to date. Equity markets are
delivering steady, if unspectacular gains, with emerging
markets, pacific basin and North American regions
outperforming Europe. The total value of Irish pension
schemes is now likely to be in the region of €120 billion.
Many myths have grown up about pension schemes
over time, aided in some cases by dramatic newspapers
headlines. Falling stock markets make for good stories
but precious little attention has been given to the
improvement in the valuation of pension schemes in
recent times. We regularly hear about pension schemes
being “wiped out” and defined benefit schemes being
“a thing of the past”. The reality is very different.
In fact, Irish pension schemes have taken action to
address deficits, implementingof detailed fundingplans.
While a significant number of smaller defined benefit
pension schemes have closed the pace of closure has
slowed. Contrary to a widely held perception, Defined
Benefit schemes are and will continue to be central to
the Irish pension landscape for many decades to come.
The recently published Pension Authority Annual
Report sets this out in clear detail. At the end of March
this year there were 133,000 active members of defined
benefit schemes subject to the funding standard, a
marginal reduction on the 135,000 members a year
previously. In addition there are over 100,000 current
pensioners in defined benefit schemes and 413,000
deferred members.
For many of these deferred members their DB pension
will be the bedrock of provision for their retirement.
Add in the nearly 340,000 active members of public
sector defined benefit schemes and you have over one
million people for whom a DB pension is central to their
long term financial wellbeing.
A key challenge for pension fund trustees is how to
protect the hard won gains in the value of schemes for
by Kevin Barrett