IRELAND - Total assets of Irish pension funds are estimated to have fallen to E43bn this year compared to E50.6bn at the end of 2001 according to the Irish Association of Pension Funds (IAPF).
This is the result of the most sustained bear market in the last 50 years, said John Feely, chairman of the IAPF, on the publication of the Association's Asset Allocation Survey for 2001.
The annual survey shows that at the end of December 2001, 64.6% of pension fund assets were held in equities. Exposure to the Irish equity market fell to 15.7% in 2001 compared to 18.7% at the end of 2000, although investment in Irish equities still makes up more than half (51%) of the total equity investment by Irish pension funds in the Eurozone.
Holdings in US equities rose from 13.9% in 2000 to 16.3% in 2001. Eurozone holdings increased slightly from 14.5 to 15%. Investment in Japanese equities continued to slip to just 2.8% at the end of 2001.
Historically, investment in equities has provided the best return over the long term, said Feely.
The decline in equity markets over the last three years has come off the back of exceptionally strong equity returns in the previous 15 years. Investment in equities has been a major factor contributing to the growth in Irish pension assets from E12bn just 10 years ago to their current level.
However, he cautioned that returns from equities in future may not be as high as those achieved in the past.
Because of increased life expectancy combined with the likelihood of lower returns and interest rates, we need to look at a more flexible approach to retirement.
“It may be desirable from an economic and social perspective to encourage people to continue to work, full time or part time, into their 70s if they wish rather than setting an arbitrary retirement age of 65.
“The recent trend towards early retirement is not likely to be affordable in the future,” Feely added.
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