Dan Neville
Question:126 Mr. Neville asked the Minister for Finance his plans to alter the present basis of contribution to or investment in the national pensions reserve fund. [5433/03]
Written Answers - National Pensions Reserve Fund.
Joe Costello
Question:131 Mr. Costello asked the Minister for Finance if he will make a statement on the performance of the national pensions reserve fund; the extent of the losses incurred by the fund at the latest date for which figures are available; and if the Government intends to amend the legislation to allow the resources of the fund to be used to finance all or part of the 10,000 affordable houses agreed in the recent national agreement talks with the social partners. [5358/03]
Eamon Ryan
Question:139 Mr. Eamon Ryan asked the Minister for Finance if a change of policy is being encouraged to reduce the use of the national pension fund moneys in equity investment in international stock markets. [5398/03]
I propose to take Questions Nos. 126, 131 and 139 together.
One of the key principles underpinning the National Pensions Reserve Fund Act is the fact that the fund is managed by commissioners who are independent of Government. The commissioners control and manage the fund with discretionary authority to determine and implement an investment strategy. The Act requires the commission to follow a strictly commercial investment mandate with the objective of securing the optimal return over the longterm subject to prudent risk management. In following this mandate, the commission has decided on an investment portfolio of 80% equities and 20% bonds.
These features of the National Pensions Reserve Fund Act are similar to the trustee arrangements which exist in private pension funds. Along with the statutory prohibition on drawdowns from the fund prior to 2025, they insulate the fund from day to day pressures on Government and enable the commission to take a long-term view. This is essential if the purpose for which the fund was established, to meet as much as possible of the cost to the Exchequer of pension payments from 2025 until at least 2055, is to be achieved. I do not intend to propose any change to the provisions of the National Pensions Reserve Fund Act 2000 to direct the commissioners to invest fund moneys in any particular way. There is nothing to prevent the commissioners from investing in housing or other infrastructural projects in Ireland should such investments yield a commercial return.
A total of €8,163 million has been paid into the NPRF since its inception in April 2001 by way of capital contributions from the Exchequer. The provisional market value of the fund at end 2002 was €7,426 million, that is, there has been a decline of €737 million. This represents a return of -13.3% since the fund's inception, as opposed to a return for the fund's strategic benchmark of -24.4% and a return for the average Irish managed pension fund of -19.3 %.
The National Pensions Reserve Fund Act places a statutory requirement on the Minister for Finance to make a payment of 1% of GNP into the fund each year. I have no plans to introduce amending legislation to change this requirement.
To leave discretion in the making of the 1% contribution would, I am convinced, undermine the whole basis of the fund. If discretion were left in the making of the payment of the 1% contribution, it is likely that future Governments would come under pressure to prioritise shorter-term economic goals at the expense of making the payment. It is essential that the mandatory contribution be maintained. Once it is breached for one purpose, it is more likely that it will be breached again.