The bill to establish a reserve pension fund for the State was published by the Minister for Finance, Charlie McCreevy, on 14 June and was immediately welcomed by the Irish Association of Investment Managers for the commercial mandate it gives the fund.
First promised last summer, the bill provides for the establishment of one rather than two separate funds for social welfare and public servants’ pensions. One per cent of GNP is to be paid into the fund up to 2055, and drawdowns may not be made before 2025.
The main new aspects set out in the bill relate to clarification of institutional arrangements for the pension fund. A seven person National Pensions Reserve Fund Commission is to be established to ‘control, manage and invest the assets of the Fund’. It will determine the investment strategy of the fund, using ‘appropriate benchmarks against which the returns of the fund can be assessed.
The investment policy of the fund will be ‘to secure the optimal total financial return, as to both capital and income’, provided the level of risk is acceptable to the Commission.
The NTMA is to be appointed as manager through which the Commission is required to perform ‘all its functions’ (other than the appointment of the manager and auditors to the manager). The Commission, through the NTMA, will be empowered to appoint private sector discretionary investment managers, and custodians for the funds assets. The Irish Association of Investment Managers said that this ‘will enable IAIM members to partly cover the nation’s pension fund liabilities in future years’. The bill provides for classes of assets which may be invested in, including options and other derivatives, but excluding Irish government securities.
Seven commissioners are to be appointed by the Minister for Finance, including a Chairman and the chief executive of the manager (the NTMA). The bill sets out that the Minister may only appoint people, who, in the opinion of the Minister, have ‘substantial expertise and experience at a senior level’ in investment, international business management, finance or economics, law, actuarial practice, accountancy or auditing, the Civil Service, trade unions or the pensions industry. There is to be an ‘equitable balance’ between men and women on the Commission. Appointments may be for a maximum term of five years and no more than two terms. Initial appointees will be limited to a first term of three or four years. |
