IRELAND - Many defined benefit plans will not have improved their position against the minimum funding standard (MFS), even though pension funds grew 25% to e77.9bn in 2005, the Irish Association of Pension Funds (IAPF) has warned.
IAPF chairman Joe Byrne cautioned: Despite the impressivegrowth achieved, many DB funds will not have improvedtheir solvency position when measured against the MFS as set down by the Pensions Board, which is now under review.”
The 25% growth was reported in the IAPF’s annual asset allocation survey, published today. Year end AuM for 2004 was e62.3bn.
Byrne said the risk of DB plans not improving their solvency position was due to historically low long term interest ratesand improving mortality assumptions, which were dramatically increasing the cost placed on scheme liabilities by the MFS.
This puts further pressure on contributions required from sponsoring employers and the sustainability of scheme benefits in the private sector,” he said.
The IAPF reported that assets under passive management had risen to 27.8% by the end of 2005, compared with 25.8% at end 2004.
By year-end equities accounted for 65% of AuM compared with 63.1% at end 2004. The domestic equity content decreased by 0.8% over the year, from 12.2% at 31 December 2004 to 11.4% at end of 2005.
The Eurozone region weighting remained virtually unchanged at 17.4% at end 2005 and Irish equities were found to represent 39.6% of total Eurozone equity holdings, a drop of 1.5% compared with end 2004.
Holdings in fixed interest and index-linked stock dropped from 23.5% at end 2004 to 21.5% at end 2005, a drop which IAPF said reflected the underperformace of bonds relative to equities and property during the year. Government issue represented 18.3% with corporate and index-linked bonds rising to 3.2%.
Over the year the property content increased from 7.4% to 8.0%. Cash and other short term instruments fell back marginally from 4.7% to 4.5% at year end.
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