PENSION ASSETS in Ireland rose 13.6 per cent last year to €72.2 billion, while reducing exposure to equities saw funds lag the bounce in stock markets, according to the annual Irish Association of Pension Funds (IAPF) investment survey.

Less than 60 per cent of funds held in defined contribution (DC) schemes are now invested in equities, noticeably less than the figure for defined benefit (DB) schemes.

“This suggests that DC members, stung by losses in pension fund values, remain reluctant to invest in equities,” said IAPF director of policy Jerry Moriarty. He warned that an equity-shy approach by DC investors ran the risk of missing the benefit of a stock market bounce if last year’s returns were replicated in 2010.

Close to a quarter of assets were allocated to bonds last year. This curbed gains, as bonds with maturity of less than 10 years returned an average of 4.9 per cent in 2009, compared to average stock market returns of about 30 per cent.

Property, which accounted for 3.8 per cent of DC fund assets and 4.9 per cent of money in DB schemes was the underperforming asset class in 2009 with losses of 23.3 per cent.

DC schemes unexpectedly accounted for a smaller share of Irish pension funds last year for the first time in several years. Mr Moriarty said this was likely to reflect a fall in contributions from members into DC schemes

He said, the survey confirmed the precarious state of pension fund investment. “Reducing tax relief on ordinary members’ pension contributions [as planned in the National Pensions Framework] will only further reduce the incentive for members to invest adequately in their pension.”