IRELAND - Irish pension funds have grown 25% to €77.9bn in 2005 according to the annual asset allocation survey published by the Irish Association of Pension Funds.

"This is the best performance by Irish pension funds since 1997," said Fiona Daly, managing director of Rubicon Investment Consulting, which conducted the survey for the IAPF.

"The increase reflects the positive market environment throughout 2005, together with continued inflows from plan sponsors to address scheme solvency positions."

"Despite the impressive growth achieved, many defined benefit funds will not have improved their solvency position when measured against the minimum funding standard as set down by the Pensions Board which is now under review,” said IAPF chairman Joe Byrne.

He said that this was due to historically low long-term interest rates and improving mortality assumptions which are dramatically increasing the cost which the funding standard places on scheme liabilities.

"This puts further pressure on contributions required from sponsoring employers and the sustainability of scheme benefits in the private sector.

“Of course, public sector benefits are also increasing in cost in a similar fashion, and as a consequence of various benchmarking exercises, but because these benefits are unfunded no-one appears to be counting the cost."

The survey found that the trend towards passive management slowed slightly in 2005. “By the end of 2005, the proportion of assets under passive management rose to 27.8% compared with 25.8% at the end of 2004.