Joe O'Toole (Independent)

This is a timely motion. I welcome the Minister of State, Deputy Parlon, to the House. On a number of occasions I have supported fundamentally — as I did in another life — the establishment of the National Pensions Reserve Fund. It was probably the finest moment of the former Minister, Mr. McCreevy's, tenure. I supported it then against many odds and when many groups in society were opposed to it. It is the essence of good politics to take a decision that will not bear fruit for more than 20 years because it means there is nothing in it for the person taking the decision. I also believe that the Government since then has been right to ensure that nobody could get their fingers into the trough of the National Pensions Reserve Fund.

I fundamentally disagree with the view offered by Senator Ross earlier in which he referred to the fact that a blind donkey could do better in terms of earning more money. If he can find that blind donkey I will be a customer of it anytime. To subvert that often heard phrase, "Live donkey and you will get grass." I will feed that donkey with grass as long as it keeps producing these kind of results.

It is worthwhile reminding ourselves what exactly has emerged from the National Pensions Reserve Fund. During the first quarter of this year it showed a return of 5.4%. More importantly, it showed a return last year of 20%, which is great. It is also important to recognise that in 2002-03 when equities fared badly and the fund did not do well that politicians from all sides, including Senator Ross, were the first to say that this was not astute management. I welcome the opportunity of putting on the record that the kind of management that has taken place under the aegis of the National Pensions Reserve Fund has been very good in terms of its objective, which is to have 9% in small cap equities and in private equity over the next four or five years. This is most shrewd.

The National Pensions Reserve Fund must be complimented on the fact that it has resisted what the blind donkeys have done all over Europe, namely, put our money into hedge funds. I would not sleep soundly at night if I thought my pension fund manager was putting money into hedge funds. The Minister for Finance did not make the point that in comparing issues we must compare like with like.

Senator Ross referred to far higher returns than the National Pensions Reserve Fund has achieved but it would be helpful if he made the comparison with pension fund management as opposed to equity fund management and the kind of approach that must be taken. The fact that the National Pensions Reserve Fund people have managed to get a 6% compound increase over the past four or five years is something on which it should be complimented.

It is also a fact that in terms of the outlay, it is appropriate that almost 20% of the investment is in bonds and cash. The funds that were referenced by the blind donkey were funds that have no money in bonds or cash because these are parts of the safe investment that has to be done in any maturely invested and managed pension fund. I welcome that.

I do not know if the point was made earlier that the National Pensions Reserve Fund cannot be invested in Government bonds. It is precluded by law from doing so for very sound reasons. If we are looking after our future we do not need to invest in our future to secure it. That would be like chasing our own tail.

It is appropriate that instead of investing in hedge funds the National Pensions Reserve Fund has managed to put 2% or 3% of the total fund into emerging markets. Overall, we should say to people that this money is wisely, shrewdly and properly invested and that it does look to our future. That is something about which we can be proud.

Another point that has not been made is that when this fund was established in the first place there was a concern about the problem of paying for our pensions from the year 2020 onwards and that because there would be so few people working to support those people who would no longer be working this would cause a major problem for the future. One significant thing has happened since then, that is, thankfully, that there has been a huge influx of immigrants to this country in order to ensure the growth of our economy and to pay our pensions in the future. Every time we hear it said in debate that people are coming to this country and supposedly taking Irish people's jobs, even though they are jobs Irish people do not want to do, we should point out that this is how our pension will be paid. What is happening is that this is securing our future.

The other thing we need to say which is not something the Department of Finance is inclined to say, but it is worth saying, is that even in 2000 or 2001 when we established this fund and when we were worried about our exposure and liability in the future we had a lesser pro rata exposure than, for instance, Italy or Germany and they have not taken anything like these measures. We have been far more astute in dealing with that problem and at the same time our problem has eased so it is fair to say we have made significant progress.

The point the Minister made in his contribution is one which we need to examine and which is not understood by too many people — that people paying their stamps will have their basic social welfare pension and when we talk about having an obligatory pension — my colleague Senator Quinn and I have been saying this for many years — that it is building on top of that. We should say to people that by paying their PRSI, people will develop an entitlement to the social welfare fund but that will not be enough to look after them. If one wants the level of comfort to which one is used, one must also make a commitment to a private investment. That is the future.

One thing about which I worry — I heard somebody say it on the radio during the week — is that pension funds are not the best approach. They might not be the best approach but perhaps no one way is the best. The same man said one would be better off investing in property. I will say two things about that. First, over the past 30 years, property has not done as well as equities. We should keep reminding ourselves of that. Over the past ten or 12 years property prices have escalated in this country but over the past 30 or 40 years they would not even touch what equities have done. Second, properly invested pension funds will also include an investment of some kind in property. For instance, about 5% of the National Pensions Reserve Fund is invested in property.

We should put some simple facts to the public when we talk about this matter in future. First, our investment is a good idea and that it is properly and responsibly managed. Second, when we ask people to invest in pensions in future we should stress that it is to give them a level of comfort which they will not otherwise have. They are doing it for themselves. Third, it does not take from the social welfare pension which would still be available. Fourth, that putting all one's eggs in one basket is what one does if one invests in property instead of in a pension fund. That is exactly what is wrong with it. In the meantime we will keep an eye out for the mad donkey and if the Minister of State can find him, he and I will pay for its upkeep over the winter and see what it will do for us.