John Gerard Hanafin (Fianna Fail)

I second the motion and welcome the Minister to the House. The National Pensions Reserve Fund is not a particularly political issue. However, I remember the quotes from the year when the fund did not perform to standard. The Opposition spokesperson stated that the "discovery that €1 billion of the €8 billion invested in the National Pensions Reserve Fund over the past two years, has been wiped-out raises serious questions" and that "the Minister has preferred speculating on overseas stock markets to investing in our own economy". The spokesperson stated:

It is not enough for the Minister to wash his hands and say that he has left the management of these monies to independent fund managers. The Government must take responsibility for investing taxpayers' money in a beneficial way. Fund managers are acting within the narrow limitations that the Government has set. . .

If these are the criteria, we should be patting ourselves on the back and telling ourselves we have done a great job as a Government. However, this is not the time or place to do so because this is a national strategic fund which belongs to the whole nation. I take pride in knowing it was a Fianna Fáil-led Government which put the fund in place. I take pride in the fact it was the prudent use of money from the flotation of Eircom, €6.1 billion, which set up this fund that will ensure our futures.

The investments have performed extraordinarily well — over 5% in the first quarter and over 19% last year. With any strategically managed fund, the mandate has been to manage it on a commercial basis. That responsibility has been given to the National Treasury Management Agency by the Government and it deserves our commendation. However, as with any fund, we should be prepared to accept the ups and downs which will come. We have done extraordinarily well this year and last year, and long may that continue. There is a policy of looking at the possibility of changing and moving the fund, as necessary.

At present €11 billion is in the large capitalised markets with equities at 73%. The intention is to move that strategic allocation to 63% by the end of 2009. There is €540 million in the small capitalised markets — 3.5%, which will increase to 4% by 2009. There is 2% in the emerging markets, which is a prudent use of the moneys. We have 0.1% in private equity, which will increase to8%. Property will increase from 0.8% to 8%. That would seem to be strategic and prudent management, particularly as equities may not continue to perform as they have done in recent years. We could not, or should not, expect them to perform as they have because nothing has exponential growth. As one commentator said recently "no tree grows to the sky". We also have investment planned for commodities, forestry and for sovereign, government and corporate bonds, which is very prudent.

Having said that, we should also look at the general pension situation. One of the most important policy challenges facing this country and this generation is the urgent need to reform our pension system so that it lays the foundations for future retirement, in security and with dignity, for all the people. There are no quick fix, magic wand solutions to the fact that almost half the country's workforce of 2 million people do not have personal pensions. Ireland is not unique in having a looming pensions problem. Throughout the world, governments and societies are grappling with the impending crisis of a lopsided population structure in which older people far outnumber younger workers. Ireland's response to the challenges and opportunities posed by this rapid social, economic and demographic change will influence the future shape of our society for decades to come. In that context, I again commend the benefits our young immigrants are bringing to our economy.

At present 900,000 people — almost half the country's entire workforce — do not have any private pensions and, as of now, are facing into a retirement in which their main source of income will be the State welfare pension. At least half of these are women. While there have been substantial improvements in welfare pensions in recent years, the reality is that many of those relying exclusively on these pensions will continue to have a high risk of poverty. The number of people aged over 65 years will more than treble from the current level of approximately 464,000 to 1.5 million by 2056. At present in excess of four workers contribute to the support of each pensioner. This will fall to 2.7 in 2026 and to fewer than 1.5 workers per pensioner in 50 years time. The cost of our social welfare and State pension system will increase in the same period from over 4.3% of GNP to 13.8%. This forecast of spiralling costs is far ahead of any estimates to date and will come as a major surprise to those who have played down the challenges faced.

Just over 43% of self-employed people have a supplementary pension against 54% of employees. Indeed, when one takes out the public sector, it emerges that 43% of private sector workers have personal pensions. Only 33% of existing pensioners have income from an occupational or private pension. At present the pension system replaces 51% of pre-retirement income for couples and 43% for single pensioners. Some 40% of occupational pension schemes which reported to the Pensions Board last year failed to meet the funding standard required by legislation. These figures pose serious questions for our society.

The decisions we make at this time will impact on almost everyone, whether they are pensioners or starting work. Our choices are limited and at times stark. We can reduce benefits, increase taxation, work longer or increase the advance provisions we make through the National Pensions Reserve Fund or through personal savings. The National Pensions Reserve Fund has stood us very well in terms of the perception of where we will be, as a nation, in 30 or 40 years time and what we will have achieved through it and the security of having it as the demographics change.

We have opportunities ahead. The SSIAs will mature and I hope we will be able to present to the public an opportunity to use moneys normally expended on SSIAs to benefit from the changes introduced by this Government to allow those on the lower tax rate to benefit as well as those who already benefit at the higher tax rate. That will ensure we continue to thrive as we have done and look to the future comfortably and confidently.