Irish pension funds posted double-digit gains last year, finishing in positive territory for the first time since 2000. Group managed pension funds grew, on average, 12.6 per cent in 2003 as stock markets recovered from a three-year slump triggered by the bursting of the technology bubble.

The end-year figure was boosted by a strong performance in December, where funds rose in value by an average of 2.1 per cent as stock markets rallied following profit-taking in November.

The result comes despite adverse currency movements which saw the euro rise strongly, especially against the dollar where it ended the year 19 per cent stronger than at the outset.

Irish Life Investment Managers (ILIM) was the star performer in 2003, recording gains of 14.9 per cent, a full percentage point ahead of nearest rivals Acorn Life and Friends First's investment arm Foreign & Colonial.

Even Standard Life, the poorest performer in 2003, showed a return of 11.4 per cent.

Mr Gerry Keenan, director of investment development at ILIM, said a key driver of performance had been the "very strong performance of international equities".

However, over the longer term, which is considered a better reflection of pension performance, Irish Life's performance is still anaemic.

Montgomery Oppenheim, whose returns show it ranking consistently in the top four over every timeframe, led its rivals over the 10-year period with annual growth of 12.5 per cent.

"Naturally, we are very pleased to be ranked number one but the real winners are our clients, who have consistently benefited from the best returns in the market," said Mr Kevin Gallacher, head of business development at the fund manager.

Montgomery Oppenheim was the only group to record double-digit growth over the last 10 years. Its nearest rival, Bank of Ireland subsidiary New Ireland, saw its fund rise 9.8 per cent per annum over the same period with Eagle Star back in third at 9 per cent growth each year.

Canada Life was the poorest performer in the long term, with annual growth of 6.8 per cent, fractionally worse than AIB Investment Managers and Standard Life.

The average 10-year return of 8.5 per cent put pension performance comfortably ahead of inflation, which averaged around 3 per cent over the comparable period.

Mr Tom Geraghty, senior investment consultant with Mercers, said the 2003 out-turn masked a volatile performance. "The average fund fell over the first three months of the year by 5 per cent, recovering by more than 18 per cent since March," he said.

The end of the war in Iraq was the turning point for stock markets. Ms Fiona Daly, head of investment consulting, said: "This recovery was fuelled by signs of strong economic growth, improving corporate earnings and falling interest rates combined with low inflation," she said.

She said funds showed a move away from defensive stocks during the year, moving into cyclical sectors like technology and telecoms. Smaller companies also found themselves coming back into favour.

Ms Evelyn Ryder, an investment consultant at Hewitt & Becketts, said the best performers in 2003 were managers who invested on the presumption of a recovery and those who insured against a fall in the dollar.