Ireland has confirmed that it is to launch a new sovereign wealth fund which could grow to more than €100bn by the mid-2030s, tailored to cover known future costs such as age-related spending.

Finance minister Michael McGrath told Ireland’s parliament on Tuesday in his 2024 budget speech the planned Future Ireland Fund would “help to protect living standards and public services for current and future generations”.

A second major new fund was also announced – the Infrastructure, Climate and Nature Fund – to hold €14bn by 2030, to allow for sustained levels of investment in infrastructure in case of economic downturns and to back climate and nature-related projects.

“These funds are vital to help future proof our economy and our public finances,” he said.

The Future Ireland Fund, which will be created using some windfall corporate tax receipts, was not a “rainy-day fund”, the finance minister said, because it was to cover costs known to be coming up in the years ahead.

“It will help us to meet the costs of running the state in the future, and will make a contribution to the cost of healthcare, pensions, home care and much more,” he said, adding that age-related spending was set to grow by around €7bn to €8bn over the current decade.

The digital and climate transitions would also involve significant costs, he said.

Ireland would invest 0.8% of GDP annually into the Future Ireland Fund from 2024 to 2035, amounting to approximately €4.3bn in 2024, with seed funding of just over €4bn flow in from next year from the dissolution of the current National Reserve Fund, he added.

“It is expected that with a funding level of 0.8% of GDP annually, the fund could potentially reach a total of €100bn by 2035,” McGrath continued.

The intention is to preserve the fund “over a longer period” with the investment return being used to support government spending, he said, adding that it would be up to the government of the day when the drawdown occurred.

“There are of course risks that could crystallise over the contribution period such as a national or global economic shock or reduced corporate tax receipts, but as we stand here today, this is a realistic and achievable plan for Ireland,” he said.

The Infrastructure, Climate and Nature Fund, meanwhile, will also invest a portion of the windfall corporate taxes, he noted, and is to operate counter-cyclically in times of fiscal and economic stress to provide investment.

This second fund will grow by €2bn for seven consecutive years, with the first of those contributions coming from the dissolution of the National Reserve Fund, said McGrath.

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