Shane Ross (Independent)

I welcome this very timely debate. It is a bit of an old chestnut which comes up from time to time but nothing ever seems to happen. We debate pensions every few years but there does not seem to be any dramatic movement. We seem to say the same things and be somewhat impatient. I welcome the Minister's speech because he has an understanding of, and perhaps even a sense of urgency about, this issue about which we should be almost alarmist at this stage. It is not one which will particularly bother my generation but it will be very serious for the next generation if we do nothing about it.

It is very difficult for politicians to tackle this problem because it involves issues which do not result in any immediate dividends for them. They do not get votes out of it because they are looking after future generations. They are, in effect, taking money from present generations, who are the voting population, to give to future generations, who probably are not. It is a difficult issue. Although there are flaws in it, I applaud the initiative taken by the previous Minister for Finance in setting up the National Pensions Reserve Fund under the auspices of the National Treasury Management Agency and in taking a percentage of gross national product out of the Exchequer to fund that. That was a very courageous political move for which he and the Government at the time received no benefit. It is the sort of foresight politicians should be encouraged to have even if they do not get immediate applause.

There are two elements to this motion. To some extent, the Minister concentrated on the first one, namely, the actuarial difficulties, the benefits between defined contributions and defined benefits and the way it will be approached because of the demographic problems we have. I do not wish to address that specifically in the time I have but wish to say something about the pensions industry. We should ask how and why we are in such difficulty. We have a small older population and a very large younger one. We face a real problem with pensions deficits not only in private sector bodies but in semi-State ones as well. The Minister will be aware of that. The ESB and many other bodies have serious problems which will have to be tackled. Otherwise people will be left without pensions or with much lower pensions in the years to come.

It is very easy to make broad sweeping statements about actuarial presumptions into the future and to make predictions, which actuaries do, about funding deficits which are accurate in as much as they can be, although they are based on certain assumptions. In a debate of this nature, I suggest to the Minister that he look at the pensions industry in a different light, and I was in the financial world for many years, although I have been out of it for many years too. It is a kind of honey pot for the financial world. As the Minister knows, in the pensions industry vast sums — billions of euro — are being played with by people who supposedly know a great deal about investment. It basically supports stockbrokers, bankers, lawyers, actuaries and fund managers. They all have their greasy hands in this very large pot and are all taking an awful lot out of it. At the end of the day, they are all doing very little for the pensioner.

The most bogus profession in the world is fund management. These people are entrusted with our pensions and charge vast sums of money for giving us advice on where we should put it. They almost inevitably get it wrong. It is quite staggering that any study of almost any group of pension funds over a period and the way they are managed will come up with the same result, namely, that it would have been far better if the original investments had been left alone and not meddled with by these particular experts. This makes me wonder whether we should ask not so much about the actuarial predictions and the demographic changes which will take place but about who the hell these people are who have this money and what they are doing with it.

Pension fund managers all charge approximately 1% for churning one's money around and producing pretty similar results. This is particularly the case in Ireland and especially so among pension fund managers with household names. They all charge the same amounts and over a long period there is no difference in their performances. They are paid huge sums of money but once a benchmark is applied, it shows they have not done anything for the pensioner.

I have studied this subject in some detail. Most managers of pension funds benchmark themselves against each other, not against any index known to man, and they all come in together and very close to each other because they all invest in the same things. This may be a slight use of a broad brush generalisation but they all invest in the same asset allocation and the same type of proportions in property, equities, gilts and cash. They show similar annual rates of return over a long period and it does not matter very much which pension fund one chooses because the result will be the same. The people who benefit most are the pension fund managers, the stockbrokers and the bankers whereas the pensioner will get very little. There will be no bang for one's buck from these guys because this is a honey pot for them. They do not have to do very much and the business is a mystery to the layman who thinks that these guys have some sort of magic which will increase his pension. They are what is known in the industry as index huggers. They put investors' money into various leading shares in various leading indices and markets and they all achieve very similar results. The result is partly the reason for the enormous pension fund deficits.

I am concerned about the Irish Pensions Board, not because it is a politically appointed board but because I query whether it does anything to regulate pensions. When the Irish airline pilots bought Aer Lingus shares, they bought at a very heavy price. It was patently obvious to everybody they were using their pension funds for strategic reasons in the battle for control of Aer Lingus and in the battle between Ryanair and Aer Lingus, and for other reasons. It was quite obvious the shares were not being bought for investment purposes. I cannot understand how the Pensions Board can stand behind pensioners' money being used for strategic instead of investment purposes. The trustees and others should have been down their necks about it. The Pensions Board has failed the ordinary airline pensioner as a result. I hope there will be no more cases of this nature.