Pension Fund posts 28% decline in 2008

The national pension fund posted a 28 per cent decline this year due to instability in the financial system and the crisis in the global economy, it emerged today.

The fund was established in 2001 to meet the costs of social welfare and public service pensions from 2025 onwards when these costs are projected to increase dramatically due to the ageing of the population. 

The fund was valued at €16.4 billion on the 30th of December, compared with €21.3 billion a year earlier, the National Treasury Management Agency (NTMA), which administers the fund, said in a statement today.

The statement said the performance reflected the "exceptionally difficult market conditions in 2008" as the worsening credit crisis took its toll on economic growth.

The agency said long-term investment funds had been severely affected by market conditions following the collapse of Lehman Brothers and the escalation of the credit crunch "into the most serious financial and economic crisis since 1929".

The Iseq index recorded a decline of some 66 per cent in 2008.

"There is as yet no sign that the worst of the crisis has passed or that markets will start to recover soon," the NTSA said in the statement.

The Fund currently holds shares in approximately 2,600 quoted companies worldwide and holds some 160 corporate debt securities. It holds government bonds issued by ten euro area governments.

It has investments with 19 property investment managers and 26 private equity  investment managers.

The Fund is to get €500m-a-year in dividends following the Government's move to take control of Anglo Irish Bank and invest billions in the country's two biggest banks, the Minister for Finance Brian Lenihan said last week.

The Government announced plans to invest €1.5 billion to buy preference shares in Anglo as part of a €5.5 billion investment by the State to recapitalise credit institutions in Ireland.

In return, the bank will pay 10 per cent a year interest to the State, while Bank of Ireland and AIB will pay 8 per cent interest for the State's €2 billion investment in them. 

The agency stressed that the Fund's performance "will be determined by the long-term growth of the global
economy over a 25 to 30 year period, rather than by sharp market movements in response to extreme events."