Defined-benefit pension plans’ progress slips in last few months

Ireland’s largest defined-benefit pension plans managed to wipe out their deficits early this year, only to see them re-emerge as markets took a tumble in the past two months, according to a new study.

The 10th LCP survey covers the 15 largest Irish-listed businesses that have final salary, or defined-benefit, and 11 major semi-State enterprises.

It shows that deficits in their pension scheme fell by 40 per cent or €1.4 billion in 2017, to €2.2 billion.

"This report confirms many positive trends," according to Conor Daly, partner at LCP Ireland. "We believe that, for the first time since commencing this analysis in 2008, the aggregate pension deficit for the Irish-funded schemes of the companies analysed was fully eliminated in September 2018," he said. "However, their progression back into deficit since September points to continuing volatility and risk."

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LCP says a major factor in the improved state of the schemes was strong investment performance and the impact of measures by scheme trustees to manage liabilities.

Post-crash positions

“In the first nine years of this report – from 2008 to 2016 – the average funding level rose by only four percentage points from their post-crash positions of 81 per cent in 2008 to 85 per cent in 2016,” Mr Daly said. This year, the schemes surveyed showed an average funding level of 91 per cent – “a larger increase in one single year than the cumulative previous nine years of our analysis”.

Of the companies analysed in this survey, four – AIB, Kingspan, UDG Healthcare and Irish Continental Group – had sufficient assets to meet their liabilities. That's an improvement on last year, when only AIB and Kingspan managed to do so.

UDG at 116 per cent is the strongest-funded while the Central Bank (69 per cent) and CIÉ (73 per cent) are worst-off.

The highest deficit among the State companies was CIÉ at €784 million. Among the publicly quoted companies, Bank of Ireland’s pension hole of €478 million is the largest.