‘Greater potential for domestic insurance and pension funds to invest in economy’

There is much greater potential for domestic insurance and pension funds to invest in the Irish economy in an effort to help the overall recovery, Department of Finance secretary general John Moran told the Irish Life pensions conference.

Only 33% of domestic policyholder funds were invested in Irish assets at the end of 2010. The percentage of pension scheme funds invested in Irish assets was much lower, said Mr Moran.

“If there is an increase in the level of domestic funds investing in Irish Government bonds, then it will make a more compelling case why international investors should take a punt on government debt, he said. “Moreover, it seems to me to be in everybody’s interests that we create investment so that the economy can grow and allow for a better standard of living for society as a whole.”

He said the Department of Finance was actively looking at ways that investment in infrastructure projects could be structured that would be attractive to pension funds. Mr Moran highlighted that public private partnerships (PPPs) offer significant potential to match long-term pension assets and provide diversification of funds.

Restrictions on tax reliefs and other tax changes, as well as concern about future changes has probably had an impact on the public’s confidence in pension investment, said Mr Moran. He acknowledged that the pensions sector had made a sizeable contribution to shoring up the Government’s finances.

There will be a further change to the tax incentive regime for pensions in the next budget. Mr Moran welcomed input from the industry as to how this could be best achieved.

The NTMA has recently launched annuity bonds with the aim of attracting Irish pension funds. Annuity bonds are suitable for pension funds because they combine a combination of principle and interest payments every year.