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Investment considerations for Irish defined benefit schemes 

Key investment considerations for trustees and sponsors for Irish defined benefit (DB) pension schemes

Many Irish DB pension schemes currently enjoy a strong funding position, a testament to disciplined contributions, prudent investment strategies, and favourable market conditions over recent years. However, it is crucial that trustees and employers do not become complacent.

There have been significant developments in Eurozone bond and derivative markets that are directly impacting the effectiveness and cost-efficiency of hedging strategies employed by DB schemes. The Netherlands – the Eurozone’s biggest defined benefit pension market – is moving to collective defined contribution and will be closing out positions in long-dated bonds and swaps in the coming years.

The largest core Eurozone economies are coming under scrutiny with pressure on French and even German bond pricing. Schemes looking to hedge inflation-linked liabilities have fewer avenues to do so with Germany no longer issuing inflation-linked bonds.

Against this backdrop, three key themes will shape the future of Irish DB investment strategy through the rest of 2026 and beyond:

  1. DB destination planning
  2. The total portfolio approach – managing risk holistically
  3.  Cashflow-driven investing

Read our paper and watch our latest video to explore each of these key themes in greater detail.    

Top investment considerations for trustees and sponsors of Irish defined benefit schemes

Read our paper where we the key themes that will shape the future of Irish DB investment strategy for 2026 and beyond.
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DB destination planning - defining your scheme’s strategic objective

Successful investment outcomes begin with a clearly defined objective rather than merely pursuing returns. DB Destination planning is a fundamental step in managing defined benefit pension schemes. This destination typically falls into one of two categories:
  1. Near-Term Buy-In or Buy-Out:
    Involves purchasing a bulk annuity policy from an insurer, with either the policy becoming an asset of the scheme to match some or all of the liabilities (buy-in) or full transfer of all scheme liabilities and associated risks to the insurer (buy-out). Strong funding levels, maturing membership and the emergence of deferred annuities mean that full scheme buy-outs are now a viable option for an increasing number of schemes. Early planning and a wide consideration of factors is required, given the potential need for asset / benefit re-structuring and the impact on members that may wish to transfer out prior to retirement.
  2. Liability Run-Off:

    Maintaining a tailored investment portfolio designed to meet liabilities over time while dynamically managing risks. While scheme running costs need to be considered, run-off can avoid passing profits to insurers and allows members and employers to potentially benefit from surpluses and the additional benefit flexibility inherent in a pension scheme (for example payment of discretionary pension increases).

    Choosing the appropriate destination requires careful consideration across a wide range of factors including investment, actuarial, legal, risk management and risk transfer.

This is a critical decision, as the optimal investment decisions that trustees might take will likely differ significantly depending on the scheme’s ultimate intended destination and the likely timelines to get.

Choosing the appropriate destination requires careful consideration across a wide range of factors including investment, actuarial, legal, risk management and risk transfer.

This is a critical decision, as the optimal investment decisions that trustees might take will likely differ significantly depending on the scheme’s ultimate intended destination and the likely timelines to get there. As well as considering the views of their advisors, trustees should also engage with the scheme sponsor to get their perspective and ensure that any long-term strategic decisions are being made considering all relevant stakeholders.

Whilst buy-in / buy-out may be the suitable choice for a number of schemes, many other trustees and sponsors may prefer long-term run-off through maintaining a fully-funded liability hedging portfolio while simultaneously holding surplus assets that have the potential to generate growth, serve as a buffer against residual risks, and ultimately provide potentially enhanced benefits to members and/or a refund of surplus to the sponsor.

For those trustees targeting liability run-off, the total portfolio approach and cashflow-driven investment are likely to be key pillars of a successful long-term investment strategy.

For further information on any of the topics raised in this paper, please contact us.

Regulatory Information

See our Important Notices for regulatory information.

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A range of solutions for every stage of your defined benefit plan journey 

  • Mercer Pension Risk Exchange

    An online marketplace for organisations and trustees considering a bulk annuity transaction. The exchange provides direct access to up-to-date insurer pricing and shows the cost of an annuity transaction relative to scheme funding and accounting metrics. Contact us to find out more.

  • Mercer Dynamic De-risking Solution

    Capitalising on our risk management and operational expertise, this solution provides a framework to define your target endgame, along with a roadmap to get there. The roadmap helps you to react to market conditions and continue on the path to your desired outcome. Contact us to find out more.

  • Implementation and Investment Solutions

    We can help you define, develop and implement your investment strategy by addressing areas such as governance, risk, sustainability and diversification. We flex our services to suit your needs and help you achieve your investment goals.

  • Defined benefit (DB) dashboard

    This is an interactive online tool that provides an overview of key statistics from all your defined benefit plans globally, including investment strategy, funding position, projected cash flows and value at risk. It can be customised to drill down to different levels of plan information, and allows users to assess ‘what-if’ scenarios. Contact us to find out more.

  • Sustainable investments

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  • Asset manager research

    By subscribing to MercerInsight®, an alliance with eVestment, you can gain access to data, analytics and our forward-looking research on asset managers and thousands of investment strategies across both public and private markets.

  • Global and local actuary

    Focusing on issues impacting the benefits and wider compensation needs of multinational organisations, we provide advice, strategy and coordinated delivery of global and regional solutions. Leveraging our proprietary Mercer Globe tool, we provide global coordination of funding and accounting valuations, assumption setting, consolidated reporting and global DB and DC plan management. Contact us to find out more.

  • Transaction Services

    Our teams are deeply experienced in helping clients managing the complexities of transactions such as buy-ins, buy-outs and large member option programmes.  We can draw on deep industry relationships, including with the insurer community, to assist clients in assessing the feasibility and optimal design of such solutions, along with assisting at every stage of the implementation journey. Contact us to find out more.

  • Strategic research

    Become a member of the MercerInsight® Community today to get access to strategic research from hundreds of thought leaders around the world, including Mercer and third-party publishers. It’s complimentary and easy to join.

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