Irish pension schemes are being pushed closer to bankruptcy because of the historically low returns on bonds issued by top-rated countries such as the US, Germany and the UK.

Unusually low yields, driven by heavy demand for the safe-haven securities, are seriously limiting pension-fund performance and making it harder
for schemes to close their deficits.

Investors have piled into AAA-rated sovereign bonds throughout the financial crisis to shelter from the volatility of other asset classes, such as stocks.

This has driven up prices in the secondary market, pushing yields down.

Pension funds normally expect to earn 5%-7% from their bond portfolios, but for the safest government securities, returns have dropped to just 2.5%-3% for the 10-year debt pensions invest in.

Up to 90% of Irish companies' defined-benefit pension schemes are running major deficits and are being threatened with closure if they can't plug the gap between payments to members and the value of their investments.

Fund managers are under pressure to move money to
higher yielding securities, but many are constrained by strict rules.

Last week, it emerged that the pension funds industry was lobbying to relax regulations limiting exposure to riskier government debt.

Some riskier sovereign debt, such as Irish bonds, is yielding more than 6.5% – more in line with the needs of pensions funds.