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Irish pension funds diversify amid uncertain outlook

Irish pension funds diversify amid uncertain outlook

Pension funds here have lowered their exposure and diversified into property, infrastructure and hedge funds according to a new report from Mercer.

The survey of 876 institutional investors across 12 countries managing assets of around €1 trillion found average equity allocations for Irish defined benefit schemes have fallen and now stand at just 28% compared to 34% in 2018

The Mercer’s 2019 European Asset Allocation survey also found that bond allocations remain broadly at 50%, while allocations to alternative assets like property, infrastructure and hedge funds have continued to increase from 15% up to 22%.

“While 2019 has so far been marked by cautious optimism, investors need to remain vigilant in an ever-evolving macro-economic and political backdrop,” said Olivier Santamaria, Head of Investment Consulting, for Mercer (Ireland) Limited.

“In the past year, Irish pension funds have reduced their exposure to equities, diversifying into other asset classes including property, infrastructure and hedge funds.”

The heightened global awareness of the sustainability agenda also appears to have had an impact, with just over half of schemes now considering environmental, sustainable and governance (ESG) risks as part of their investment decision-making, up from 40% last year.

Regulatory pressure seems to be the main driving force behind this behaviour the survey found, with just 14% of respondents indicating decisions are being driven by the challenges posed by climate change.

“Mounting evidence of overextension of credit means investors should continue to position their portfolios to weather possible market volatility, in the face of political uncertainty and diminished liquidity as Central Banks reign in their market involvement,” Mr Santamaria said.

“We expect the increasing focus on sustainability to continue and anticipate ESG factors will become an integral part of investment strategy setting and risk management.”

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Less than half of all employees have a private pension – CSO

Less than half of all employees have a private pension – CSO

Less than half of all employees in Ireland were saving towards a pension last year, according to the Central Statistics Office.

Its survey of pension coverage in the third quarter of 2018 found that 47.1% of all people in employment were contributing towards a private pension.

That is up 0.4 percentage points on the same period of 2015.

When pension coverage from previous employments, as well as deferred pensions and pensions in draw-down mode, are included the ratio of those covered rose to 56.3%.

The CSO found that just 16.3% of people aged 20-24 were contributing to a pension, compared to almost 71% of workers aged 45-54.

Meanwhile the data shows that more than half of all self-employed people had pension coverage.

The Irish Congress of Trade Unions said the figures highlighted the need for pension auto-enrolment as part of a wider reform of the system in Ireland.

“Tax relief has failed as a policy instrument for encouraging low and middle-income earners to save enough towards a financially secure retirement, and there is no legal obligation on an employer to provide or contribute to a pension scheme for employees,” said ICTU’s social policy officer Dr Laura Bambrick.

“As the State pension is paid at a flat-rate, rather than earnings-related, workers without retirement savings are exposed to a significant drop in their living standards in old age.”

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