The aggregate surplus of 13 of the largest listed companies’ and 11 semi-state or state controlled companies’ defined benefit (DB) pension schemes in Ireland had increased to €4.2bn, as at 30 November 2022, according to analysis by LCP Ireland.

This represents an improvement of €3.8bn compared to December 2021, when the aggregate funding surplus of the schemes analysed was €0.4bn.

The Irish DB schemes have been showing continued improvement over the past two years, as the aggregate funding level increased from -€2.4bn in December 2020 to €0.4bn in December 2021.

The improvement observed in 2022 was primarily driven by a significant rise in bond yields, LCP stated, which had resulted in a fall in pension scheme liabilities.

While this has been somewhat offset by rises in inflation expectations and the poor performance of pension fund assets in recent months, this was not enough to prevent the increase in 2022.

The improvement in 2021 was due largely to strong returns on global equities, according to LCP, with the aggregate funding position of the schemes analysed moving into a surplus for the first time in 14 years since LCP has been carrying out this analysis.

In 2021, the aggregate funding level had increased to 96 per cent, with LCP noting that this will likely have increased further during 2022.

The average allocation to equities for the companies included in the report fell from 59 per cent in 2009 to 28 per cent in 2021.

Pension contributions paid by the companies remained relatively stable over the past three years, falling from €800m in 2019 to €700m in 2021.

“The movement of pension scheme finances into a surplus position is remarkable given the market volatility over the year,” commented LCP partner, Conor Daly.

“We expect to see many schemes take action now to de-risk further to ‘lock’ in recent gains.”

LCP partner, Martin Haugh, added: “There were some dramatic movements in markets over 2022 and these have had an impact on pension scheme finances.

“In particular, the very significant rise in bond yields has resulted in a material reduction in the value placed on pension scheme liabilities in company accounts.”

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