The National Pensions Reserve Fund is managed by commissioners who are independent of the Government. They control and manage the fund with discretionary authority to determine and implement an investment strategy for the fund. The 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.
The features of the Act are similar to 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 2025 until 2055, at least, is to be achieved.
Section 19 of the National Pensions Reserve Fund Act 2000 provides that in investing fund moneys the commission will seek to optimise total financial return provided the level of risk is acceptable to the commission. Therefore, the commission is required to adopt a standard commercial investment policy and it does not have the discretion to choose not to invest in particular sectors or companies for anything other than commercial reasons.
In determining the investment policy of the fund during the drafting of the National Pensions Reserve Fund Act, I considered whether the policy should be strictly commercial or whether it should be qualified by ethical, environment and other public policy criteria. A major difficulty in deciding on an ethical investment policy is where to draw the line, given that there will inevitably be different opinions and intense debate on what constitutes ethical and socially responsible investments. There is unlikely to be broad consensus on any ethical investment policy. I have no plans to revisit this aspect of the matter.
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 the end of the year. The commission's report for 2002 was published on 23 July 2003. The commission is specifically required to include in its 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 the end of the year. These requirements are designed to ensure that detailed information concerning the fund is made available to the public at the appropriate time.
