Liz McManus (Wicklow, Labour)
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Question 60: To ask the Tánaiste and Minister for Finance the surplus in the social insurance fund for 2007 and the cumulative surplus at end of 2007; the projected surplus in the social insurance fund for 2008 and the cumulative surplus at end of 2008; the structure of its investment profile and the way this differs from that of the national pension reserve fund; and if he will make a statement on the matter. [15601/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The provisional annual surplus of the Social Insurance Fund in 2007 was €581.7 million and the provisional accumulated surplus of the Fund at the end of 2007 was €3,630.8 million. The annual surplus of the Fund in 2008 is estimated to be €548.1 million and the accumulated surplus at the end of 2008 is estimated to be €4,178.9 million.

The investment of the accumulated surplus of the Fund has been delegated, subject to guidelines, to the National Treasury Management Agency. In line with those guidelines, the accumulated surplus is invested in euro deposits and Government bonds. These guidelines and investment policy reflect a strong liquidity preference in the investment of the accumulated surplus, as funds must be available to meet the benefit and other liabilities of the Fund as required. That prudent approach is also dictated by the projections contained in the recent Actuarial Review of the Social Insurance Fund, which indicated that, having regard to stated assumptions, the accumulated surplus will run down in the early years of the next decade.

The National Pensions Reserve Fund was established with the objective of meeting as much as possible of the cost of social welfare pensions and public service pensions from 2025 until at least 2055. Under the provisions of the National Pensions Reserve Fund Act 2000, the National Pensions Reserve Fund Commission controls and manages the National Pensions Reserve Fund and it has discretionary authority to determine investment strategy in accordance with the Reserve Fund's statutory investment policy of securing the optimal total financial return provided the level of risk to the moneys held or invested is acceptable to the Commission. In formulating its investment strategy, the Commission has regard to, inter alia, the Reserve Fund's long-term investment horizon and strong cash flow, due to the annual Exchequer contribution of 1% of GNP. The Commission's asset allocation strategy, therefore, is founded on the premise that real assets, such as equities, will outperform financial assets such as bonds over the Reserve Fund's long term investment horizon. Therefore, the differences in investment horizons and capacity between the Social Insurance Fund and the National Pensions Reserve Fund are reflected in their respective investment strategies.