Mercer’s analysis shows strong asset growth bolstered ISEQ-listed companies’ DB pension scheme funding in 2023 

DUBLIN, 25 July 2024 – Mercer, a business of Marsh McLennan (NYSE: MMC) and a global leader in redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being, revealed today that despite increasing liabilities over 2023, defined benefit (DB) balance-sheet positions for Ireland Stock Exchange Overall Index (ISEQ)-listed companies had an estimated surplus of over €1.1bn at the end of last year. This contrasts with historic lows and multi-billion-euro deficits for DB pension schemes at times over the last decade, peaking at a deficit of around €4.5bn in December 2016.

Mercer’s analysis found that DB pension scheme funding positions remained steady and generally in surplus last year due to strong growth across all major asset classes, including equity markets, which were up 15% – 25%.  While bond yields fell and pension scheme liabilities increased over 2023, yields remained significantly higher than in the years prior to 2022 when they were near 0%.

Corporate bond yields – through which companies measure DB pension scheme liabilities – fell by about 0.6% in 2023. A fall in bond yields increases pension scheme liabilities, meaning that ISEQ-listed companies saw liabilities increase by 5% – 10% in aggregate last year. This increase in liabilities was partially offset by lower inflation expectations.

Over the course of 2024, corporate bond yields have risen again, which has reduced pension scheme liabilities. While rising yields have reduced the value of pension scheme assets held in bonds, Mercer expects funding levels to have improved through to the end of May 2024.

Peter Gray, Mercer’s Ireland Wealth Corporate Consulting Leader, said: “Pension scheme funding remains healthy with elevated bond yields and lower liability values. Inflation expectations have fallen, and the European Central Bank has recently cut rates after successive increases. At the same time, many schemes have de-risked, reducing the likelihood of significant deficits from future rate cuts. However, those schemes that remain exposed to interest rate changes should consider their next steps and align investment strategies with future pension obligations.”

Notes for editors

The value of pension scheme liabilities is calculated in different ways depending on the purpose of the calculation. The data included in Mercer’s analysis is based on publicly disclosed information using the approach that ISEQ-listed companies must adopt for their corporate accounts. The data underlying the analysis is refreshed as companies report their year-end accounts. Other measures are also relevant for trustees and employers considering their risk exposure.

About Mercer

Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s more than 20,000 colleagues are based in 48 countries and the firm operates in over 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with more than 85,000 colleagues and annual revenue of $23 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit mercer.com. Follow Mercer on LinkedIn and X.