Mary Hanafin: responsible for State pension policy

Ireland's pension funds have been the worst performers in the world this year, dropping more than those in meltdown econ­omies such as Iceland and Hungary, according to a survey of 28 countries by the Organisation for Co-operation and Development (OECD) published on Friday.

The authoritative Paris-based organisation said Irish pension funds lost 33% of their value, far worse than the United States, Iceland and Hungary, the next worst performers.

All countries showed falls this year, but pension funds in Britain, Spain, Poland, Greece, Turkey, Mexico, Slovakia, Germany, Finland, the Netherlands and Denmark recorded substantially superior returns to those achieved on behalf of Irish pension funds, the OECD reported.

The survey may be used as ammunition by critics of the pensions industry here because Irish investment managers have for years been pouring substantial amounts of money into a handful of stocks on the Irish stock market, stocks that have been in meltdown this year.

The exposure of pension savings to a small stock market such as Dublin has probably been among the highest in the world.

"The impact of the crisis on investment returns has been the greatest among pension funds in countries where equities represent over a third of total assets, with Ireland the worst hit. Irish pension funds were the most exposed to equities, at 66% of total assets on average," the OECD said.

Last spring, pension managers still held as much as 15% of long-term savings in Dublin stock market-listed companies, and the amount has fallen only because of the collapse in the value of Irish bank shares.

The survey said some OECD countries with large defined systems, such as Ireland, are reporting lower funding levels and in some cases funding gaps with pension liabilities greater than assets.

"It can be difficult to know the real situation of funds because of accounting practices used by the pension industry," the OECD warned.

The Sunday Tribune last month reported that a memorandum sent to Minister for Social and Family Affairs, Mary Hanafin, said that some high-profile defined-benefit pension funds were close to collapse because of pension deficits.