Transcript constructive federation operatives pension scheme

PUBLIC PENSION FUND MANAGEMENT
NATIONAL PENSIONS
RESERVE FUND IN IRELAND

Anne Maher
Chief Executive
The Pensions Board
Ireland
Washington DC
24-26 September 01
WHAT I WILL COVER
 Background
 Objective and Process
 National Pensions Reserve Fund Act
 Establishment and Strategy
 Current Position
 Issues and Prospects
2.
BACKGROUND
IRELAND HAS
FIRST PILLAR
Contributory (and non-contributory)
31% average industrial earnings
Pay-As-You-Go
Sustainable
PUBLIC SERVICE PENSIONS
Facing big cost increase (doubles over next 15 years)
DEMOGRAPHICS
Favourable for 10 years
3.
BACKGROUND (continued)
IRELAND HAS
ECONOMY
Modern and successful
GDP growth of 9.9% per annum for last 5 years
INVESTMENT
Domestic and international experience
FUNDED PENSIONS
Well developed
Covering 50% workforce
NATIONAL PENSIONS POLICY INITIATIVE
Examined long-term retirement provision
4.
OBJECTIVE AND MOTIVATION
 To secure pensions in retirement for
progressively ageing population
5.
PROCESS
 FIRST PILLAR
National Pensions Policy Initiative Report 1998
 PUBLIC SERVICE PENSIONS
Commission on Public Service Pensions Report 2000
 BUDGET STRATEGY
Dept. of Finance Report of Budgetary Strategy for
Ageing 1999
LED TO
 TEMPORARY HOLDING FUND FOR
SUPERANNUATION LIABILITIES ACT 1999
 NATIONAL PENSIONS RESERVE FUND BILL 2000
 NATIONAL PENSIONS RESERVE FUND ACT 2000
6.
NATIONAL PENSIONS RESERVE FUND ACT 2000
 Establishes Fund
 Obligation to pay 1% GNP per annum (plus additional
sums if approved by Parliament)
 Sets up independent Commission
 Requires strictly commercial investment mandate
 Has prohibition on drawdowns until 2025
 Appoints NTMA as manager
 Allows Commission to appoint investment managers
and custodians
 Provides for accountability and annual reports
 Requires annual audit
 Winds up Temporary Holding Fund
7.
ESTABLISHMENT OF FUND
 Fund set up on 2 April 2001
 7.2 billion Euros rising to 41 billion Euros by
2025
 Commission appointed
7 members
NTMA to act as manager
 Agreement of Investment Strategy
8.
INVESTMENT STRATEGY
Issues
 Asset allocation and manager structure
 Eurozone/Non-Eurozone Equity Split
 Active/Passive Split
9.
INVESTMENT STRATEGY (continued)
Agreed Strategy
Major Asset
Classes
Overall
Allocation
Proportion to Proportion
be Passively to be
Managed
Actively
Managed
Equities of which
80%
Eurozone
40.0%
Global ex Eurozone
40.0%
27.9%
14.2%
12.1%
25.8%
Bonds
20.0%
14.8%
5.2%
Total
100.0%
56.9%
43.1%
10.
CURRENT POSITION
Consultants appointed
Global Custody
Manager Selection
Transition Manager Selection
Manager Selection
Mandates out to tender
11.
Current Position (continued)
Mandates out to Tender
 3 Pan European Equity Activity Core portfolios valued at about 300
million Euros each
 1 US Equity Enhanced Index portfolio valued at about 350 million Euros
 1 US Equity Active Growth portfolio valued at about 300 million Euros
 1 US Equity Active Value portfolio valued at about 300 million Euros
 1 (or possibly 2) Japanese Equity Active portfolio(s) valued in total at
about 300 million Euros
 1 Pacific Basin ex Japan Equity Active portfolio valued at about 90
million Euros
 1 (or possibly more) Eurozone Equity Passive portfolio(s) valued in total
at about 2 billion Euros
 1 (or possibly 2) US Equity Passive portfolio(s) valued in total at about
625 million Euros
 1 Eurozone Long Bond Active portfolio valued at about 350 million
Euros
 2 Global Equity Active portfolios valued at 350 million Euros each
12.
Current Position (continued)
 TENDER PROCESS
Stage One
Stage Two
Criteria
 COMMITTING THE ASSETS
Pace
Average in over period of months?
13.
ISSUES
 Government Access
Independent Commission
Commercial investment mandate
 Distortion of Markets and Corporate
Governance
Geographic distribution at discretion of Commission
Controlling interest in any company prohibited
 Targeted Investment
No mixing of financial and social objectives
Commercial investment mandate
14.
ISSUES (continued)
 Manager Selection
Commission is international
Subject to EU procurement of services for public funds
Directives
 Drawdowns
Prohibition until 2025
Must be determined by increases in over 65s
 Changes in Circumstances
Provides for continued monitoring
15.
PUBLIC REACTION
Very little!
Parliamentary, political or public
Role of NTMA as manager
Commission should have had freedom to appoint
Appointment of Commissioners
Conflicts of interest
Lack of representation
Other (better?) uses for monies
Contribution to individual pension policies
16.
CONCLUSION
Part of overall Irish pension reform/planning
Broad consensus that it is right course
Fund is in place
Wide range of safeguards
And I believe it should achieve its objective.
17.