Dáil Éireann díospóireacht -
Wednesday, 10 Nov 1999

Vol. 510 No. 4

Written Answers. - Pension Provisions.

Thomas P. Broughan

Ceist:

23 Mr. Broughan asked the Minister for Finance when he will introduce legislation to provide for part payment of future pension liabilities; the way in which he will give effect to the Government decision; the demographic projections for the next 50 years on which the decision is based; and if he will make a statement on the matter. [22694/99]

Michael Noonan

Ceist:

51 Mr. Noonan asked the Minister for Finance the way in which the new State pension fund which he has proposed will be built up; if the fund will be organised and administered by his Department or by an independent agency; and the restrictions, if any, which will be placed on investment of the fund. [22513/99]

Minister for Finance (Mr. McCreevy)

I propose to take Questions Nos. 23 and 51 together.

The House will be aware of the decision by the Government to begin providing resources on a planned basis towards the Exchequer cost of future social welfare and public service pensions. This cost is expected to escalate over the coming decades as a result of demographic changes leading to a progressively ageing population. The Government has decided that a provision of 1 per cent of GNP should be set aside each year to pre-fund part of this prospective cost. It has also decided to allocate a major tranche of the proceeds of the Telecom flotation to supplement the annual allocations.

The Government decision was taken in the light of the findings of a working group which I set up in my Department to examine the implications of the ageing population. These findings are contained in the report of the Budget Strategy for Ageing Group which was published last July. The findings of the report were based on the demographic projections contained in the Actuarial Review of Social Welfare Pensions undertaken in 1997 by the Irish Pensions Trust on behalf of the Department of Social, Community and Family Affairs. Account was also taken of actuarial studies undertaken for the Commission on public service pensions.

Implementing the Government decision will require detailed legislation providing for the establishment of two statutory pension funds – a social welfare pensions reserve fund and a public service employees' pension fund. My Department is currently working on this legislation and I hope to be in a position to introduce it in the House in the new year. The legislation will define the liabilities of each fund and provide for annual Exchequer allocations to the funds to meet such liabilities. It will set out the arrangements for the administrative control and management of the funds and a general investment mandate within which this is to be exercised. Proposals have yet to be finalised on these issues. However, I would not wish to see restrictions being placed on the investment strategy to be adopted by the funds which would prevent the funds from securing the best commercial returns consistent within a prudent risk profile. Nor do I envisage my Department being involved in the day-to-day management of the funds. I have, however, already stated in public that I see considerable advantages in the NTMA having a significant role to play in the ongoing management of these funds.

Finally, I will shortly introduce a Bill in the House to provide a temporary holding fund for Exchequer monies allocated in 1999 for pension funding, pending the enactment of the detailed legislation setting up the two permanent pension funds. The Bill will delegate management of the fund to the NTMA which is currently managing the short-term investment of the proceeds from the Telecom flotation. I will be seeking to have this Bill passed before the year's end.