Dáil Éireann debate -
Tuesday, 23 Nov 1993

Vol. 436 No. 1

Written Answers. - Pension Funds Investment.

Richard Bruton

Question:

20 Mr. R. Bruton asked the Minister for Finance whether he has included representatives of pensioners on the committee which he has established to examine the diversion of money from pension funds to indigenous enterprise ventures, so that the long term interest of pensioners will be protected; and if he will make a statement on the matter.

Martin Cullen

Question:

31 Mr. Cullen asked the Minister for Finance the progress, if any, that has been made to date on the suggestion that pension funds should take into account the wider needs of the economy in their investment managing.

Minister for Finance (Mr. B. Ahern)

I propose to take Questions Nos. 20 and 31 together. Regarding Question No. 20, I take it that Deputy Bruton is referring to the Steering Committee set up to monitor the progress of the Pension Fund Investment report which was launched last week.

I would point out to Deputy Bruton that I did not establish the Steering Committee concerned. The report was commissioned by the Irish Association of Pension Funds and was carried out under their auspices. I agreed that my Department would participate in the Steering Committee which the IAPF established to work with the consultants on the report. The Steering Committee also included nominees of the Irish Association of Investment Managers, the Irish Insurance Federation, the Irish Business and Employers Confederation and the Irish Congress of Trade Unions.

I think the wording of the Deputy's question suggests that the initiative which I launched in my Budget Statement last February has in some way threatened the interests of pensioners. I want to categorically refute that. Unfounded rumours have been circulating about the initiative since its inception, to the effect that the initiative was in reality nothing short of a tax or levy on pension funds and pensioners and that pension funds were being forced to invest in high risk projects with little expectation of a return commensurate with that risk.

Let me state clearly in this House that there is no basis whatsoever for either of these suggestions. This is not a tax on pension funds or pensioners; they are simply being asked to make funds available for a particular area of investment. Moreover, there is no question, and never has been, of the Government asking pension funds to invest on anything other than a commercial basis. The purpose of the initiative is quite simply to improve the availability of equity finance to Irish business so that the spirit of enterprise is not frustrated and job creation hindered by a lack of funds for good projects. To that end pension funds are being asked to provide a funding facility for commercial ventures the scale of which represents a very small percentage of the vast assets at their disposal. I would stress the word commercial and I would stress the words funding facility — there is no element of uncommerciality or compulsion involved.

Regarding representation on the Steering Committee, while representatives of pensioners were not specifically on the Committee, I would point out that the views and interests of pensioners were taken into account in a number of ways. As I mentioned, there was representation of employee and employer groupings, both of whom would have a keen interest in the well-being of pension arrangements. Most importantly the Irish Association of Pension Funds itself represents the interests of a broad cross section of employers, pension fund trustees and professional advisers engaged in the establishment, administration and investment of occupational pension schemes in Ireland. As the main trustees representative organisation the Association was well placed to ensure that the interests of trustees and therefore of pension fund scheme members, including pensioners were clearly voiced. As the Deputy knows, the management and operation of funded pension schemes is governed by the Pensions Act 1990, by trust law, by individual pension scheme documents and by various Finance Acts. Primary responsibility for the proper operation of pension schemes rests with the trustees who owe a legal duty of care to all members. It is the trustees' responsibility to ensure that schemes are properly funded, properly administered and properly and prudently invested in accordance with the rules of each scheme. It is in this way that the long term interests of members and pensioners are protected. Nothing in my budget initiative or in the recent Pension Fund Investment report compromises these duties.

I should also mention that as part of their wide-ranging research into the Pension Fund and Venture Capital areas, the authors of the report met with a number of individual pension fund trustees and with a number of pensioner representative bodies. The Deputy can rest assured, therefore, that the particular views and concerns of both trustee and pensioners were made available to the authors of the report.

I would add, that the results of the Pension Fund Investment report itself, more than anything else, should reassure Pension Fund Trustees and indeed pensioners. The report makes it clear that investment in venture and development capital will not take place unless both trustees and their investment managers believe it is prudent. It also states that there is no reason why, if venture capital investment is underpinned by appropriate specialised skills and expertise, trustees responsibilities cannot be fulfilled through such investments. It concludes, that it is appropriate that pension fund money should be made available by trustees for investment in venture and development capital if investments are made on a commercial basis.