Pension funds push higher

Dominic Coyle

Pensions grew sharply in October after a hiccup in equity markets the previous month.

Group managed funds turned in an average growth of 4.1 per cent compared to an average loss of 2.5 per cent in September, according to Buck Consultants. Hibernian was the best performer, with its funds gaining 4.5 per cent in October, marginally ahead of KBC Asset management and Montgomery Oppenheim.

But the big banks missed out, with Bank of Ireland bettering only Canada Life, with 3.7 per cent growth. AIB also failed to shine.

The recovery helped pension funds to push growth into double figures for the year to date - 10.8 per cent compared with 6.3 per cent at the end of the third quarter. Pension funds were boosted in October by a strong quarterly reporting season from US firms, which served to underpin the equity markets that account for 60-80 per cent of group funds.

Over the longer term, the funds are still struggling to recover from the three-year market slump. The three-year average remains in negative territory at -6.9 per cent per annum, although it is improving on the 7.7 per cent deficit recorded at the end of September. Pension performance is more accurately measured over the longer term and, over five years, group managed pension funds have recorded growth of 2.7 per cent each year.

Over the five-year term, Bank of Ireland has outperformed all but one of its rivals with annual growth of 5.2 per cent. AIB, by contrast, is propping up the table with annual growth rates of just 0.8 per cent.

Companies have been struggling with fund deficits as a result of the prolonged bear market in equities. The current recovery gives some hope of mitigating the effects of those shortfalls.