IRELAND - Officials of the Irish ministry of finance have today strenuously denied the government is working on legislation to take a two-year pension holiday from the National Pension Reserve Fund (NPRF).

Claims emerged over the weekend suggesting the government is reviewing its annual contributions into the reserve fund, launched in 2001, in order to save up to €4bn to be spent elsewhere.

Just days after the NPRF revealed a negative return of -12% in the first half of the year, media reports also claimed ministers were in the final stages of drawing up legislation which would provide the government with the windfall.

However, a government official told IPE today brandished the reports as ‘inaccurate', stating: "The Government is not working on any legislation to 'take a break' from our contributions to the National Pension Reserve Fund."
He added it would also be inaccurate to say the government is reviewing its contribution to the NPRF.

"The Minister said that the situation was being constantly monitored to ensure that the investment in the NPRF is in the best interests of the economy," concluded the spokesman.

Experts agreed today a possible pension holiday now would come at the worst possible time.

The NPRF published its second quarter update last Thursday alongside its annual report and the annual reports for the National Treasury Management Agency (NTMA), which manages the NPRF and the State's debt.

The fund revealed a negative return of -12% in the first half of 2008 and a negative return of -1.7% on its investments in the second quarter of 2008, which combined with the first quarter fall of -10.5% reduced the value of the fund from €21.2bn at the end of 2007 to €19.5bn by June 30 2008. (See earlier IPE story: ‘NPRF saw negative return of -12% in H1')

Minister for finance Brian Lenihan said it was clear "the turbulent winds that have blown through world stock markets" have had some effect on the pension fund in recent months.

The State contributes 1% of gross national product (GNP) to the fund every year - a sum of €1.6bn to the fund in 2007. As State finances have moved from a surplus to a deficit, these contributions are now being funded through borrowings.

Jerry Moriarty, director of policy at the Irish Association of Pension Funds (IAPF), commented today, saying: "If you are advising an individual what to do, you would tell them not to stop contributions just because stock markets are falling, and that seems to be what is driving this [discussion] as well."

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