PENSION FUNDS suffered their worst month in a decade in September as renewed volatility hit global financial markets, according to figures published yesterday.

Irish group managed pension funds have now lost more than a quarter of their value in the past 12 months. The average Irish group managed fund was 8.3 per cent weaker last month, bringing to 25.3 per cent the losses over the same time last year.

“Financial markets went into freefall during September as the fallout from the credit crunch escalated,” said Fiona Daly of Rubicon Investment Consulting. “As a result Irish pension funds fell by 8.3 per cent on average.”

Amid the carnage in September, Eagle Star was the relative outperformer, sliding by 6.7 per cent. At the other end of the scale, Hibernian Investment Managers (being renamed Aviva) suffered a 9.5 per cent reverse. Over the first nine months of 2008, Irish funds have lost 22.2 per cent of their value on average. Friends First/FCC has fared even worse over that period, losing 25.6 per cent of its worth, compared to 17.6 per cent at Canada Life/Setanta.

The scale of the decline in fund values over the past year was illustrated by Ms Daly. She noted that a person retiring on October 1st last year would have a retirement fund €83,000 greater than a similar person following an identical investment strategy and retiring on October 1st of this year.

The turmoil in stock markets this year is reflected in falling returns over the longer term. The average Irish fund is now nursing a loss over each of the past three years of about 3.6 per cent.

Over the five-year period, annual gains amount to just 4 per cent and over the 10-year period – where pension funds also had to weather the effects of the bursting of the dotcom bubble – the annual average gain is just 3.2 per cent.

The best performer over that longer period remains Oppenheim, this week renamed as Merrion Investment Managers to reflect their new ownership. It has shown growth of 5.2 per cent on average each year over the past decade. That compares to growth of just 1.6 per cent recorded by KBC Asset Management.

Only the Oppenheim/Merrion return manages to outpace inflation, which averaged 3.8 per cent over the past 10 years.