Dáil Éireann - Volume 567 - 28 May, 2003

Written Answers. - National Pensions Reserve Fund.

  56. Mr. McGinley asked the Minister for Finance if he is satisfied with the operation of the pension reserve fund. [14589/03]

  Minister for Finance (Mr. McCreevy): One of the key principles underpinning the National Pensions Reserve Fund Act is the fact that 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 an investment strategy. The Act requires the commission to follow a strictly commercial investment mandate with the objective of securing the optimal return over the long-term subject to prudent risk management. In following this mandate, the commission has decided on a long-term asset 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 the year 2055, is to be achieved.

  Consistent with the philosophy underpinning the fund as I have just set it out, 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. It is my strong view that regular dis[1415]cussions between me and the commission on its investment strategy and the resultant short-term gains and losses, which may, in any event, never be realised, would seriously interfere with the long-term focus which must attach to a fund which will not start to make significant disbursements for over 30 years.

  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 is due around the middle of this year.

  While I am satisfied with the arrangements concerning the operation of the fund, I recognise that the arm's length relationship between the Minister for Finance and the commission does give rise to some accountability issues. To resolve these issues, the Act provides for the appearance of the commission chairperson before the committee of Public Accounts to give evidence on the commission's policies at such times as the Committee may reasonably request. I specifically included this provision in the Act to ensure that there would be direct accountability of the commission to the Oireachtas in respect of the fund's investment strategy. This requirement is additional to the standard requirement that the chief executive of the NTMA, in his role as accountable person for the fund, appear before the Committee whenever it so requests.