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Dáil Éireann debate -
Tuesday, 30 Sep 2003

Vol. 571 No. 1

Written Answers. - National Pensions Reserve Fund.

John Deasy

Question:

149 Mr. Deasy asked the Minister for Finance if he has satisfied himself with the operation of the National Pensions Reserve Fund. [20901/03]

John Gormley

Question:

167 Mr. Gormley asked the Minister for Finance if the existence of armaments firms and tobacco companies in the portfolio of the National Pension Fund will lead to proposals for changes in the way this fund can and should be organised. [20945/03]

Pat Rabbitte

Question:

173 Mr. Rabbitte 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 he will make a statement on the matter. [20769/03]

Joan Burton

Question:

192 Ms Burton asked the Minister for Finance if he intends to provide ethical guidelines for the investment of funds made by the National Pensions Reserve Fund, particularly having regard to concern expressed regarding investments by the fund in tobacco companies at a time when public policy is to discourage smoking; and if he will make a statement on the matter. [20744/03]

I propose to take Questions Nos. 149, 167, 173 and 192 together.

The National Pensions Reserve Fund is managed by commissioners who are independent of Government. They control and manage the fund with discretionary authority to determine and implement an investment strategy for the fund. This investment strategy is based on a commercial investment mandate with the objective of securing the optimal return over the long-term, having regard to (a) the purpose of the fund as set out in section 18(1) of the National Pensions Reserve Fund Act, 2000, and (b) the payment requirements of the fund as provided for under section 20 of the Act, provided the level of risk to the moneys held or invested is acceptable to the commission.

These features of the Act are similar to the trustee arrangements which exist in private pension funds. Along with the statutory prohibition on draw-downs 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 the year 2025 until at least the year 2055, is to be achieved.
However, I would point out that under the National Pensions Reserve Fund Act, the chairperson of the commission is required to appear before the Committee of Public Accounts at that committee's request. Furthermore, the commission's annual report must be laid before each house of the Oireachtas and is required to include a detailed list of the fund's assets at year end. These requirements are designed to ensure that detailed information concerning the fund is made available to the public at the appropriate time. The commission's report for 2002 was launched on 23 July 2003.
The commission is specifically required to include in the report information on the investment strategy followed, a report on the investment return achieved by the fund and a valuation of the net assets of the fund at year end. These requirements are designed to ensure that detailed information concerning the fund is made available to the public at the appropriate time.
The provisional market value of the fund at 18 July 2003, the latest date for which figures have been published by the commission, was €8,392 million. This represented a return for the year to that point of 5.2% and a reduction in the loss of capital to the fund from €737 million at end 2002 to €323 million. This capital loss is a net figure which takes account of investment income in both the temporary holding fund and the fund itself, and also of gains in the bond portion of the fund offset by declines in the value of equities.
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