The fund established to help pay Ireland's pension costs from 2025 enjoyed its best ever year in 2005 earning almost €2.5 billion through investments, it emerged today.
The National Pensions Reserve Fund (NPRF) earned a return of 19.6 per cent or €2,411 million last year bringing its total value to €15,420 million.
Paul Carty, Chairman of the NPRF Commission, said 2005 was the fund's best year since it was set up in 2001. "Its strong performance reflected the benefits of the Commission's averaging-in approach to the markets under which we continued to invest in the difficult market conditions of previous years," he said.
"As a result the fund's equity allocation was close to fully invested going into 2005 and it was well positioned to benefit from strong equity markets, particularly in Europe."
The fund, set up by then Minister for Finance Charlie McCreevy, invests 1 per cent of Ireland's Gross National Product (GNP) each year to support pension costs, which are expected to rise significantly in the future due to the progressive ageing of the population.
Since its formation in April 2001, the fund has earned €3.3 billion in excess of contributions received from the Exchequer.
In the last year the fund has diversified its investments through an 18 per cent allocation to alternative asset classes including property, private equity and commodities, to be achieved on a phased basis by end 2009.
The Pensions Board's recently published National Pensions Review projected that the cost of public pensions will rise from their current level of 4.3 per cent of GNP to 7.7 per cent of GNP by 2026 to 13.8 per cent of GNP by 2056 with the bulk of these 2056 costs (10.1 per cent of GNP) arising in the social welfare area.
The NPRF said these projections underline the seriousness of the pensions issue and the central role the fund plays in sustaining the pension system and in maintaining people's living standards in their retirement.
The fund is expected to accumulate to €140 billion or 40 per cent of GNP by 2025 and three in every four people now working are expected to benefit from the fund during their retirement.
PA