Bill on pension investment passed

LEGISLATION enabling pension funds to invest more in the domestic economy — and gain value from doing so — was formally passed yesterday.

The introduction of the Sovereign Annuities Initiative was initially proposed by the Irish Association of Pension Funds and the Society of Actuaries in Ireland and has been winding its way through the Oireachtas in the past few weeks, formally being signed off by the Seanad yesterday.

The initiative allows for greater levels of investment by Irish pension funds in Irish Government bonds, for instance, and will result in the issuance of new sovereign annuity bonds, allowing for a fixed annual return for funds, to be issued by the National Treasury Management Agency (NTMA) in the new year.

Irish pension funds hold less than 5% of their assets in Irish Government bonds.

Introducing the new legislation yesterday, Social Protection Minister Eamon Ó Cuív said: “Any investor, including pension funds, may buy the bonds. In doing so, they would benefit from higher yields than are currently available from the French or German markets.

“There are two major advantages to this new proposal. Firstly, it allows for the retention of Irish funds for investment in Ireland and secondly it allows pension schemes to benefit from higher yields than are available to them at present. This will be particularly attractive for defined benefit schemes that are currently struggling with pension deficits and unable to meet the funding standard,” he added.

“Where they do invest in bonds, Irish pension funds tend to invest in non-Irish bonds. This means that there is money flowing from the state which would be better invested in our country. We want people to buy Irish goods and to use Irish services. Investing in Irish bonds is no different.

“This type of investment in ourselves is vital to our national recovery,” he said, adding there is “absolutely no risk” of Ireland defaulting on its sovereign debt.