NTMA to issue new bonds for pension funds

THE National Treasury Management Agency is set to start issuing new Government bonds specifically aimed at Irish-managed pension funds, before the end of this month.

The sovereign annuity bonds follow on from the passing of the Sovereign Annuities Initiative legislation before Christmas — a policy first proposed by the Irish Association of Pension Funds and the Society of Actuaries in Ireland and backed by the Department of Social Protection.

The move enables Irish pension funds to invest more in Irish Government bonds. It also allows for the retention of Irish funds for investment in Ireland and will see pension schemes benefit from higher yields than are currently available to them.

“The Government saw this initiative as providing fresh opportunities for pension funds to address funding issues.

“The bonds that will be issued will give considerably higher yields than those available at present in other EU countries, such as France and Germany, and will allow Irish pension funds to avail of the higher Irish yields,” said the NTMA’s Anthony Linehan at a briefing hosted in Dublin by international financial consultants, Lane Clark & Peacock yesterday.

“While anxious to facilitate Irish pension funds, the NTMA is conscious of the burden on the taxpayer and whereas Irish 10-year yields on the secondary market may be at temporarily elevated levels, it’s not unusual for the market in long-date bonds to trade at considerably lower levels,” he added.

Lane Clark & Peacock Ireland partner Conor Daly said the legislation governing sovereign annuities and bonds, combined with the proposed amendments to the statutory funding standard, could provide “a lifeline to many trustees struggling to put viable funding plans in place”.

He said trustees and sponsors should “tread carefully” and ensure they understand any transfer of risks that may occur in implementing the initiatives.