The Minister for Finance is to appoint a committee of seven people to run what will be the State's largest pension fund. By the end of this year it will already contain £5 billion and is expected to eventually become one of the world's largest pension funds.

The appointments to run the fund will be made after the Bill, which was published yesterday, is passed by the Dail. The Bill, which is expected to be passed by October, provides for the setting up of a pension fund to cover public servant and social welfare pensions after 2025.

The legislation will oblige all future Governments to set aside 1 per cent of Gross National Product (GNP) every year as a contribution to the fund. This will occur every year, even if there is a downturn in the economy and the money needs to be borrowed. There is no provision to set aside less without a change in legislation but additional payments will be possible, following approval from the Dail. No drawdowns will be permitted until 2025. More than £4 billion has already been aside and this is likely to be almost £5 billion when the fund is up and running in the autumn. The fund will soon be the largest in the State and in time is likely to rival even the largest US funds. The National Treasury Management Agency will be manager of the fund for an initial period of 10 years. It will advise a group of seven commissioners on investment and management.

The commissioners will then tell the NTMA what the objectives are and the money will be divided between investment managers here and abroad for investment. Competition between fund managers for the business is likely to be intense. According to Mr McCreevy, the NTMA will advertise for differing tranches of the money to be invested in a certain way and the managers will then be able to tender for the business.

The fund will be almost entirely independent of Government and will have a strictly commercial investment mandate. The commission will be accountable to the Dail and will have to appear before a Dail committee. It will also have to provide detailed annual reports.

In addition, there will be an annual audit by the Comptroller and Auditor General.

Contrary to the initial announcement, there will be only one fund for both public service pensions and social welfare. This is to avoid the need for two sets of rules having to be drawn up and can be changed at any time, Mr McCreevy said.

There is likely to be serious competition for the jobs of seven commissioners. There is no information yet on pay rates but that will be decided by the Minister.

Mr McCreevy insisted that the rapid ageing of the population means that pre-funding liabilities is a prudent step which will go some way towards easing the budgetary burden for the next generation,

He dismissed suggestions that it is inequitable to expect many workers to provide both for their own retirement and for the pension of public servants.

He insisted that pre-funding is consistent with the recommendations of the National Pension Policy Initiative.

"It has been made possible by the economic success which we have worked hard to achieve. Most importantly, it can be implemented within a sustainable budgetary strategy which will allow for substantial infrastructural and other capital investment under the National Development Plan, for continuing implementation of the Programme for Prosperity and Fairness, for further improvements in public services and for ongoing reductions in the national debt," he said.