The economic fallout from Brexit has left many pension funds in tatters. The Financial Times reported that the UK's pension funding hole hit a record high of £900 billion (€1.08 trillion) on Friday as shares sank after the result was declared.

Closer to home, Irish pension schemes, which typically have about a 25 per cent equity exposure to UK and euro zone shares, were already under pressure prior to last week’s referendum. Many will now find themselves in deeper trouble.

Benefits consultants Mercer said the UK vote was likely to have a serious impact on Irish pensions. Last week, it urged pension plan trustees to assess the likely impact of future market movements. “Many people could now see their financial health and their pensions suffer some short-term volatility. Anyone seeking security by purchasing an income for life may find themselves more vulnerable,” warned Mercer’s Aisling Kelly

The Irish Association of Pension Funds (IAPF) has urged people not to panic. Its chief executive, Jerry Moriarty, reminded the public that, unless they are near retirement, they need not fret too much about short-term losses.

“If you are coming close to retirement, it is likely that your funds are automatically moved to less volatile investments to avoid losses that you may not have time to recover from,” he said. A Brexit-led collapse in the interest rate paid on bonds could see pension deficits balloon further.

“You could end up with the worst of all worlds with uncertain equity markets as you build up to retirement and then uncertainty as to what bond markets might be available if you are going to buy an annuity or pension,” said Ray McKenna of Willis Towers Watson Ireland.

Given this, McKenna said last week's Department of Finance ruling allowing members of defined benefit pension schemes who have funds sitting in buy-out bonds to purchase approved retirement funds (ARFs) with the proceeds of their pension fund, was welcome news.