Value of National Pensions Reserve Fund drops 12%


The National Pensions Reserve Fund (NPRF), which was set up by the Government to fund future State and public service pensions, lost 12 per cent of its value - about €1.7 billion - in the first half of the year due to the ongoing turmoil in global equity markets.

The NPRF said the "disappointing" performance reflected "the challenging conditions that have marked 2008" as global equity markets felt the combined impact of the credit crunch and the rising price of commodities.

Most of the losses were incurred in the first quarter of the year, when the fund saw 10.5 per cent of its value. Markets rallied in April and early May, reversing some of the losses, but plunged again in June as concerns grew about a slowdown in the global economy, exacerbating the NPRF's performance.

The figures are published in the NPRF's second quarter update, which was released today alongside its annual report and the annual reports for the National Treasury Management Agency (NTMA), which manages the State's debt, and the National Development Finance Agency (NDFA), which advises the Government on large-scale public-private partnerships (PPP) for infrastructure projects.

Speaking at the launch of the reports, Minister for Finance Brian Lenihan said it was clear that "the turbulent winds that have blown through world stock markets" have had some effect on the pension fund in recent months.

He said the Government would keep its annual contributions to the NPRF under review. The State contributes 1 per cent of gross national product (GNP) to the fund every year - a sum of €1.6 billion to the fund in 2007. As State finances have moved from a surplus to a deficit, these contributions are now being funded through borrowings.

But Mr Lenihan ruled out "raiding" the NPRF to prop up public finances, saying it would be classed as borrowing under European Union rules.

The NPRF's annualised rate of return since it was set up in 2001 has now fallen to 3.8 per cent, down from 6 per cent at the end of 2007, while its balance at the end of June 2008 stood at €19.4 billion.

Despite its losses, the fund has still performed better than the average Irish managed pension fund.

The NTMA also published the first annual report of the Carbon Fund, which manages the financial arrangements under which the State can buy carbon credits to keep its carbon emissions in line with Kyoto Protocol targets.