Third-level pension fund plan mooted

THE GOVERNMENT could transfer the pension fund assets of universities and third-level colleges to the exchequer tomorrow in a bid to close the overall deficit and regain the confidence of the financial markets, according to Ulster Bank economist Pat McArdle.

Reclassifying the third-level pension funds, which had been touted as an option for the Government last autumn, could add 1 to 1.5 per cent to Gross Domestic Product (GDP), Mr McArdle said.

“The department has had six months to prepare and this could be the rabbit in the hat in Tuesday’s budget,” he said.

When the transfers of semi-State pension assets and liabilities was examined last year, it was dubbed “creative accounting” by Fine Gael finance spokesman Richard Bruton. However, the Government is now under increasing pressure to find ways to close the overall deficit for 2009 to as close to 9.5 per cent of GDP as possible.

Mr McArdle said the objective of closing the deficit was “not per se to satisfy Brussels, but to regain the confidence of the financial markets, without which we will not be able to borrow”.

However, last week’s downgrade of Ireland by Standard Poor’s, which removed Ireland’s “AAA” status, may be matched in the weeks ahead by ratings agencies Moody’s and Fitch. Despite a surge in the cost of insuring State debt on foot of the downgrade, the spreads on Irish credit default swaps have retreated to about half of their mid-February peak.