National pension fund loses €1bn

VOLATILE stock markets have wiped one billion euro off the National Pensions Reserve Fund so far this year, it emerged yesterday.

This is the biggest hit to the public pension fund since the dot-com boom fizzled out in 2001.

The fund, set up to foot social welfare and public service pensions from 2025 onwards, was hit by the market instability following the credit crunch.

While the fund stood at around €20 billion at the end of 2007, it was down 10.5% by March this year.

Some of this loss was recouped by the end of May, though with an overall loss so far this year of 5.3%.

Chairman of the National Pensions Reserve Fund Commission, Paul Carty, revealed the figures, stressing how “volatile” the fund’s profits could be in such a short period.

In 2002, the Irish pensions reserve fund saw losses of around 16%.

Since then there have been only gains, until this year.

The fund was established in 2001, to plan for the massive costs of pensions, set to multiply in the coming years with Ireland’s aging population.

Mr Carty detailed yesterday how the pensions fund would only be able to supply between 25% and 30% of public pension costs by 2025.

This is despite the fact the fund is expected to grow to €140 billion.

The capability of meeting just this part of the pensions demand, added Mr Carty, all depended on life expectancy, births and the age profile of those living.

Irish pensions were invested in over 2,500 companies worldwide, the pensions chief told the Oireachtas Public Accounts Committee (PAC).

The national pensions reserve fund did not purposely put monies into unethical funds, the PAC heard.

TDs quizzed Mr Carty about Ireland’s investment in unethical funds. The commission has a mandate to get “optimal returns” on funds, he said. “The mandate doesn’t tell us to screen [investments].”

The pensions commission agreed earlier this year to reinvest €24 million from six cluster bomb companies, following Ireland’s hosting of a major international conference on banning the lethal weapons. The money has still to be reinvested.

The PAC heard how a committee in Norway had been set up to screen pension investments, but no similar model existed in Ireland.

Ireland currently has over €50 million of its pension fund invested in tobacco companies.

Mr Carty said yesterday the investments were “very, very attractive”.

Tobacco sector profits were substantially larger than ordinary funds, with an 18% difference in profits, TDs were told.

The €50 million is invested in nine different tobacco companies.


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