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Irish Pensions Lose €10bn in Value

By Conor Keane, Business Editor 


3 April 2008 

Irish pension funds were decimated in the first quarter of the year, losing almost €10 billion of their value as uncertainty in financial markets sent share prices tumbling. 

Hewitt Associates Limited, the strategic benefits and investment consulting firm, has just confirmed Hewitt Managed Fund Index return fell 3.6% during March. 

This is on top of a further fall of 3.6% for March 2008, or a total drop of 11.4% for the first quarter of 2008, according to Raymond Bourke of Hewitt Associates. “The quarterly fall of 11.4% is the worst quarter for the Index since Q3 2002 (-12.2%) during the last equity bear market, and before that the ‘Twin Towers’ quarter in Q3 2001, which recorded -14.0%. The worst 12 month period of recent times was the year ending Q2 2003 (-22.5%),” he said. 

Shares traded on world stock markets fell by 16.1%, with the corresponding figure for Ireland showing a drop of 10%. “Key first quarter returns within this included -16.0% for the eurozone, -17.3% for Britain and -16.5% for the US. The modest rise of 1.4% in 10 year bonds provided little respite, being only slightly ahead of cash returns of 1.1% for the quarter,” he added. 

Mr Bourke said from the viewpoint of annual returns, the worst calendar year recently was 2002 when the index returned -19.2%. “However, in the five years that followed, markets rebounded by 75% cumulatively, or 11.8% per annum demonstrating that pension funds are long-term investments and returns over periods of five or 10 years are much more important for most members than individual years or quarters,” he said. 

Shares and property values have been hit by the restrictions in credit and the downturn in growth. “These results emphasise the need to find greater diversification through investment vehicles whose performances are not closely correlated to equities,” he said. 

Mr Bourke said March saw more negative news from the financial sector, including further bond write-offs by banks, the near-collapse of Bear Stearns and evidence of a credit squeeze. “Added to this were the sharp rise in oil, the continued downturn in the US housing market, and the acceptance by most commentators that the US is now in recession,” he said. 

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