IRELAND - An Irish trade union has called on pension funds to contribute 5% of total assets to a proposed infrastructure and venture capital fund, arguing the €4bn raised could act as an alternative to the pensions levy.

Speaking at the Irish Congress of Trade Unions (ICTU) biennial conference, union president Jack O'Connor also criticised the Pensions Board, saying its actions were undermining confidence in the retirement system.

Addressing delegates, O'Connor said gross fixed capital investment had fallen by €27bn between 2007 and now as a result of the country's economic woes and argued that the €78bn held in Irish pension funds should be used to counteract the downturn.

"Today, I am calling on the Minister for Finance to engage with fund trustees to try to develop a scheme to secure 5% of their assets, i.e. €4bn for investment in infrastructure and venture capital in the domestic economy," O'Connor said, adding that participating schemes should be exempt from the government's recent 0.6% pensions levy.

The proposal received support from the Irish Association of Pension Funds, with the organisation's director of policy Jerry Moriarty believing it was a viable alternative to the levy.

"It is something we had actually put forward ourselves in response to the proposal to impose the levy," Moriarty said. "I think the idea of being able to swap the levy for an investment in infrastructure is quite attractive to funds, because it effectively gives you an immediate return on your investment."

The suggestion follows a similar cooperation between the Danish government and a number of local pension funds that resulted in the launch of a DKK5bn (€670m) venture capital fund.

Moriarty said the difficulty posed by the proposal was now finding a structure within which the investments could occur, predicting that many schemes would likely prefer direct investments managed by their investment managers, rather than pooling assets in a communal fund. 

A spokeswoman for ICTU said the union did not have a preference how the investments would be managed. "The key point is that the money will be released and help stimulate job creation," she said.

However, Moriarty said that it was likely to be "a bit optimistic" to expect a 5% contribution from each of Ireland's pension funds, but that there would be a fair amount of interest.

O'Connor further criticised the measures taken by the Pensions Board, Ireland's regulatory body, in addressing concerns about the solvency of pension funds in the country.

He argued that the union had proposed a number of measures over the past decade to help tackle the matter, in an effort to "instil confidence" in the system. "The current policy of the Pensions Board is having the opposite effect," he added.

A spokesman for the Board said the regulator had made its position clear when it published its annual report last month.

At the time, chief executive Brendan Kennedy defended the suspension of defined benefit funding standard deadlines as the "pragmatic decision", giving funds the time to address deficits.

The Department of Finance declined to comment on the proposals.