Irish fund managers have beaten their international counterparts in pension fund performance over the 14 years to 1998 by delivering a real return of 12.54 per cent a year. The figures were published recently in a study commissioned by the EU Commission and prepared by Brussels-based Pragma Consulting.

US managers were the closest competitors, returning 10.49 per cent annually. They were followed by the UK at 10.35 per cent and Belgium with 10.33 per cent. The Netherlands, Germany, Denmark and Switzerland fell further down the survey list, delivering real returns of 9.64, 6.72, 6.14 and 4.90 per cent respectively.

The consultants' report also recommends a European code of best practice for second-pillar pension funds and is expected to form the basis of an EU directive on pensions.

Among the key recommendations of the report is the need for the adoption throughout Europe of freedom of investment by pension funds. This is the system operated in Ireland, the UK, Belgium and the Netherlands. Countries that adopt this "prudent man principle" approach achieve much better investment returns, leading to lower costs, says the report.