Trevor Sargent
Question:73 Mr. Sargent asked the Minister for Finance the current value of the National Pensions Reserve Fund, comparing this figure with the amount which has been placed into the fund [30076/03]
Written Answers. - National Pensions Reserve Fund.
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. At this date a total of €8,715 million had been placed in the fund from the Exchequer. This represented a return for 2003 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. As the fund will not make significant disbursements for over 30 years it is the long-term return on its assets that is most relevant. Short-term losses or gains, which may never be realised, must be seen in this light.
One of the key principles underpinning the National Pensions Reserve Fund Act is 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 investment strategy. 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 the purpose of the fund as set out in section 18(1) of the National Pensions Reserve Fund Act 2000 and 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. In following this mandate, the commission has decided on a long-term allocation 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 the year 2025 until at least 2055, is to be achieved.
Consistent with the philosophy underpinning the fund, I do not regularly ask the commission for detailed reports on short-term investment returns. The fund's investment strategy is a matter for the commission and I have no say in it. Regular discussions between me and the commission on its investment strategies would seriously interfere with the long-term focus.
In its statutory annual report to the Minister for Finance, the commission is specifically required to include 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 commission's report for 2002 was published on 23 July 2003.
This report includes on page 24 a table setting out in money terms the fund's position to end-December 2002 as follows:
|
Temporary Fund Period to 5 April 2001 |
National Pension Reserve Fund Period from 6 April 2001 to 31 December 2002 |
Total from Inception to 31 December 2002 |
|
|
€m |
€m |
€m |
|
|
Investment Income |
358 |
457 |
815 |
|
Change in Market Value of Investments |
0 |
(1,542) |
(1,542) |
|
Expenses |
0 |
(10) |
(10) |
|
Net Investment Return |
358 |
(1,095) |
(737) |
|
GNP and Capital Contributions from Minister |
6,157 |
2,006 |
8,163 |
|
Transfer from Temporary Fund |
(6,515) |
6,515 |
– |
|
Closing Fund Value |
Not Applicable |
7,426 |
7,426 |