New Ireland has clearly emerged as the top performer in unit-linked pension funds in the eighth annual Irish Times personal pension survey, posting the strongest results over 10, 15 and 20 years.
The company, which was recently acquired by Bank of Ireland, delivered the overall top rate of return over a 10-year period, turning a £20,000 (€25,395) pension fund into a fund with a value of £44,513. This represents a net yield of 14.17 per cent per annum.
Over 15-year and 20-year periods, it also outperformed its competitors in the unit-linked area with returns of 14.46 per cent per annum and 15.6 per cent respectively. Only two with-profits funds delivered a higher rate of return.
The Personal Pension Survey, the only one to cover pension values at maturity, is produced for The Irish Times by the independent financial adviser, Financial Development and Marketing (FDM).
It compares the value of the pension fund that would be paid to a male contributor, aged 60, retiring this year, depending on the type of pension he had and which company it was invested with.
The survey is based on level contributions of £2,000 per annum over a 10, 15 and 20-year period. It therefore assumes that £20,000 would have been paid into the fund over a 10-year period, £30,000 over 15 years or £40,000 over 20 years.
Two types of pension funds are surveyed - with-profit and unit-linked funds.
With-profit funds have been operating in the market for longer than unit-linked funds and contain in-built capital guarantees. They also smooth out returns to avoid volatility and pay bonuses on maturity.
The top performer in the with-profits area, and the overall top pension fund performer over 15 and 20-year periods, was GRE Life which delivered returns of 14.72 per cent and 16.01 per cent per annum respectively.
As a result, £30,000 invested with GRE over 15 years would have grown to a fund worth £106,652 while a £40,000 investment over 20 years would be worth £268,100.
For the first time, the survey captures 20-year results for unit-linked managed funds. The two main competitors in this market 20 years ago were Irish Life and New Ireland. Two decades later, New Ireland has come out on top, delivering a net yield of 15.6 per cent per annum compared to Irish Life's 13.6 per cent. This amounts to a difference of £57,000 in value between the two funds on maturity.
Irish Life's under-performance is not confined to the 20-year period. The company, which remains the State's largest life assurer, delivered an annual return of 11.54 per cent over 10 years compared to New Ireland's 14.17 per cent. Its best performance in the unit-linked category was over 15 years - where it earned second place with a return of 11.51 per cent per annum but unit-linked funds over this period generally lagged with-profits policies. Another disappointing performer last year was Standard Life, a company long known for its consistency and conservatism. After four years in the top spot for its unit-linked 10-year returns, the company crashed to the bottom of the table in three of the categories surveyed.
According to FDM director, Mr Eddie Hobbs, Standard Life made the wrong asset allocation decision last year, moving its managed funds out of equities prematurely.
By contrast, Norwich Union turned in a good performance after suffering in recent years. The company, which was the first to bite the bullet and address the issue of artificially high with-profits bonuses, saw its results fall to the bottom of the maturity table as a result.
However, the company's competitors have since been forced to follow suit and Norwich Union funds have begun to show signs of recovery. Last year, it produced the top 10-year with-profit results at 12.95 per cent.
For those retiring this year, pension-fund maturity values have remained strong despite expectations in some quarters of a downturn as the stock market rally of recent years ran out of steam.
Average real rates of return - stripping out inflation - are hovering at 9.0 to 9.6 per cent per annum over 20 years and at just over 10 per cent over 10 years.
Whether fund values continue to hold up - in light of the disastrous performance of the Irish equity market to date this year - will depend largely on the extent to which pension funds have moved out of Irish shares into better-performing markets following the introduction of the euro, FDM believes.
(Copies of the 1999 Pension Survey are available from FDM at Summerhill House, The Curragh, Co Kildare. Tel 045-442 051. Email: fdm@fcs.iol.ie. The cost is £60 for a printed copy and £30 for an e-mail copy)
