Insight Investment

The inflationary conditions of the last two years created much discomfort for many investors, with central banks hiking rates at the most rapid rate for decades. Despite the pronounced volatility, in our view, significant opportunities now exist to position Irish pension schemes for long-term resilience and improve risk management for two interconnected reasons:

• Rising interest rates have reduced the present value of many Irish defined benefit schemes’ liabilities, leaving many schemes with an improved funding position and consequently a reduced required return to achieve their target funding outcome
• As yields have risen, contractual returns available have increased

If left unmanaged, a number of residual risks threaten this improved funding position. We think pension scheme trustees can take action to mitigate these risks by constructing resilient outcome-oriented solutions. In this article, we outline the steps we think schemes can take to improve overall resilience.