The volume and consistency of regulatory change facing Irish pension funds has been identified as the single-largest risk to the industry, according to a survey conducted for the country’s pension association.

More than two-thirds of the 50 respondents identified regulatory change as one of the biggest risks to good scheme governance, while 67% also raised concerns about the level of trustee education.

The survey, conducted for the Irish Association of Pension Funds (IAPF) by EY, also found that many funds had yet to de-risk their portfolio, although larger schemes are more likely to have a conservative asset allocation.

Jerry Moriarty, the IAPF’s chief executive, noted that the balance between return-seeking and matching assets was a “much debated point” – especially in light of recent changes to the minimum funding standard (MFS) and the future introduction of a 10% risk reserve to offset market shocks.

He said that, while too risky an approach to investment could see funds incur “significant” losses, too large an emphasis on matching assets could also see the fund’s ability to achieve returns impaired, which would “restrict long-term growth vital to deliver the promised pensions”.

The IAPF also found that 75% of respondents had either already reviewed or were in the process of reviewing their asset allocation in light of the risk-reserve requirements, coming into force from 2016.

Moriarty said that, as 45% of respondents had conducted detailed investment policy reviews and a further 27% had coupled the review with an examination of funding policies, it demonstrated the “significant impact” of the risk-reserve policy.

“The risk reserve is a laudable belt and braces concept,” he added, “but the timing couldn’t be much worse. The requirement seems to be having a significant impact on these schemes and could question their long-term viability.”

Results also showed that smaller funds usually had a larger exposure to return-seeking assets, with funds up to €25m in size investing 58% of assets in the more volatile asset classes.

However, on average, there was little difference in allocations between young and mature schemes – with average return-seeking allocations only 7 percentage points higher, at 50%, for younger funds.

Iain Brown, partner at EY, speculated that smaller schemes simply did not possess the resources to devote to de-risking.

“Nevertheless, we would expect the trend towards achieving a more matched, liability-driven investment portfolio, which relies less heavily on outperformance from return-seeking assets, to continue over time,” he said. 

The chief executive of the Pensions Board, Brendan Kennedy, previously voiced concerns that many defined benefit funds were only de-risking “begrudgingly and at the minimum rate possible”.

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