Michael Creed (Cork North West, Fine Gael)
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Question 25: To ask the Minister for Finance if he plans amendments in the legislation established to provide for an annual investment in the National Pension Reserve Fund. [31474/08]

Aengus Ó Snodaigh (Dublin South Central, Sinn Fein)
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Question 54: To ask the Minister for Finance his views on investing money from the pension reserve fund in public infrastructure projects, rather than in less stable international stocks and shares. [31312/08]

Brendan Howlin (Wexford, Labour)
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Question 64: To ask the Minister for Finance the losses incurred by the National Pension Reserve Fund during 2007 and to date in 2008; if he will propose adjustments to the NPRF's investment guidelines; if he will adjust the Exchequer contribution to the NPRF for each of 2008, 2009 and 2010; and if he will make a statement on the matter. [31347/08]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I propose to take Questions Nos. 25, 54 and 64 together.

The National Pensions Reserve Fund (NPRF) was established in 2001 under the National Pensions Reserve Fund Act 2000. The purpose in establishing the NPRF was to meet as much as possible of the cost to the Exchequer of social welfare pensions and public service pensions to be paid from the year 2025 until at least 2055. The Act requires the Government to make a contribution of 1% of GNP to the NPRF each year.

The Act also provided for the establishment of the National Pensions Reserve Fund Commission to control and manage the Fund. The Commission has discretionary authority to determine the Fund's investment strategy in accordance with the 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. The Commission's investment strategy is based on the expectation that equities or real assets will outperform financial assets over the long term despite swings over short term periods.

The National Pensions Reserve Fund earned an investment return of 3.3% in 2007 bringing its annualised return from its inception in April 2001 to end 2007 to 6.0%. It showed a return of -12.0% for the first six months of 2008, reducing its annualised return since inception to 3.8%.

I am aware and I accept that the appropriate investment strategy for a long-term fund can lead to short-term volatility, particularly in difficult market conditions such as we have experienced over the last year. Indeed the Fund previously experienced a negative return of -16.1% in the bear market of 2002 before recovering strongly over the following five years. In its 2007 Annual Report, the Commission states that, in seeking to meet the Fund's objective, it has adopted an investment strategy primarily focused on building up a diversified portfolio of equities and other real assets. Such an asset allocation offers the prospect of superior long-term return but can expose the Fund to high levels of short-term volatility. However, one of the critical factors underlying the Commission's investment strategy is the Fund's long-term investment horizon. With no drawdowns before 2025, it can afford to accept periods of volatility as a trade-off for achieving a long-term return that will make a meaningful contribution to Ireland's future pension costs and the sustainability of the pension system.

As regards the statutory contribution, Deputies will appreciate that it would not be appropriate for me, in the run-up to Budget Day on 14 October, to discuss or speculate on any of the Government's expenditure provisions for the coming year.