Pensions make some gains despite euro zone worries

PENSIONS GAINED some ground last month despite concern over euro-zone economies. The average Irish managed pension fund increased in value by 0.9 per cent, bringing the gain so far this year to 6.8 per cent.

However, funds are likely to lose ground this month with the Irish market shedding close to 6 per cent of its value in the first days of May and the Global MSCI Index giving up all of its 2010 gains.

Longer term pension growth continues to be a cause for concern.

Over the past decade, the average Irish fund has grown, on average, by just half of 1 per cent each year, according to the figures provided by Rubicon Investment Consultant.

That is significantly behind the average rate of inflation for the same period of 2.6 per cent per annum.

Four fund managers are showing losses over the past decade, with KBC Asset Managers (KBCAM) reporting a return of –1.6 per cent per annum over the period. No manager has beat inflation in that time, with Eagle Star/ Zurich Life’s growth of 1.8 per cent per annum the best recorded.

Over the past 12 months, Irish funds have recorded average gains of 26.3 per cent as they recover from the post-Lehman’s crash. Irish Life has been the outperformer over that period with a gain of 30 per cent compared to AIB Investment Managers’ 22.4 per cent return at the other end of the scale.

So far this year, Irish Life is again leading the way with growth of 8.3 per cent. Aviva Investors (formerly Hibernian Investment Managers) has lagged its peer with growth of just 4.9 per cent.

Market volatility in recent years is reflected in the three-year figures – a period in which no provider has recorded any advance. Average annual losses range from 3.8 per cent at Canada Life/ Setanta to 9.8 per cent at Aviva and KBCAM.

Over the five-year term, there has been some limited growth, with average annual returns for the industry of 2.3 per cent.

Longer-term performance is more important for pension investments and figures from Rubicon for the past 20 years show fund managers reporting growth of 7.4 per cent per annum – with Eagle Star/Zurich Life leading its rivals with double-digit annual returns over the period.