EUROPE - The Irish government has announced details of its bailout agreement with the European Union (EU) that will see the National Pensions Reserve Fund (NPRF) contribute as much as €10bn toward the €85bn package.
Additionally, the country's state pension will be frozen at 2010 rates, with no increase in line with inflation.
The news comes after Taoiseach Brian Cowen and finance minister Brian Lenihan announced the National Recovery Plan for the next three years, which indicated NPRF assets would be used to buy Irish bonds.
The Department of Finance said in a statement that the EU's €85bn bailout would consist of €17.5bn domestic funds.
A spokesman for the Department told IPE that between €9bn and €10bn would be drawn down from the NPRF to support the bailout, contradicting earlier reports that as much as €12.5bn would be contributed toward the overall package.
He said any decisions about how soon and how fast the deinvestment would occur would be a decision for the National Treasury Management Agency.
The spokesman added that further details would be released later in the week, when a Memorandum of Understanding would be published.
Further, details of the EU and International Monetary Fund's loan reveal that the country's state pension will be frozen at 2010 rates for the next three years.
A statement put out by the Department said: "The state's contribution to the €85bn facility will be €17.5bn, which will come from the National Pension Reserve Fund and other domestic cash resources.
"This means the extent of the external assistance will be reduced to €67.5bn.
"Nominal value of state pension will not be increased over the period of the plan."
Jerry Moriarty, head of policy at the Irish Association of Pension Funds, said the funds accumulated in the NPRF would have never been sufficient to cover the estimated pension liabilities in both the public sector and the state pension, which, according to most recent estimates, were €116bn to date.
"The €25bn that was in the NPRF was the only pre-funding to cover that - that was never going to be enough anyway," he said.
"Now that's reduced to €7bn means they are in a much worse place than they have been."
Moriarty said legislation existed to avoid any early draw down of assets prior to the 2025 payout date, simply because the country hit a rocky patch.
"Unfortunately, we've hit more than a rocky patch," he added.
According to its third-quarter results, the NPRF holds €24.5bn in assets, with €6.6bn invested in bank shares of Allied Irish Bank and the Bank of Ireland.
The remaining €17.9bn are held in its discretionary portfolio, which posted returns of 6% for the nine months to September, compared with 1.9% returns over the same period for its holdings in the Irish lenders.
Moriarty had previously said government proposals for the NPRF to buy Irish bonds would change the initial purpose of the sovereign fund.