€4bn investment scheme 'could replace pension levy'
PENSION fund bosses are to propose to the Government that €4bn in pension money be invested in job creation projects in this country instead of imposing a levy on private sector workers, the Irish Independent has learnt.
The measure would generate twice the amount expected to be collected from the controversial levy.
The Irish Association of Pension Funds (IAPF), which represents pension trustees, is to meet Finance Minister Michael Noonan in two weeks and propose the multi-billion euro investment idea.
Complicated government rules meant very little of the €72bn of the pension money in company plans can be invested in this country, experts said.
There is another €12bn in personal pensions and PRSAs (personal retirement savings accounts).
Director of policy at the IAPF Jerry Moriarty said his body would suggest to the Department of Finance that an infrastructure fund be set up, with trustees encouraged to invest about 5pc of the combined pension money into it.
"We have put forward a number of alternatives to the levy such as establishing an infrastructure fund where pension schemes are requested to make a specific allocation," he said.
"Venture capital funds were also well supported by pension funds in the past. Both of these would be good vehicles for real job creation and would not further deteriorate the funding position of schemes."
The controversial pensions levy is set to suck €470m a year out of funds as it will be levied at 0.6pc of the value of a scheme's assets.
It is expected to raise €1.9bn over four years.
Experts said encouraging pensions to back an infrastructure fund would mean the money could be raised faster. If €4bn was raised, this amount could then be freed up from the Government's capital budget.
Backbench TDs are coming under huge pressure about the plan to put a levy on private sector pensions, especially as the tax will not apply to public sector pensions and those with approved retirement funds.
Aidan McLoughlin of the Irish Brokers Association said strict Pensions Board rules on the need for schemes to diversify meant that most funds were invested outside the State.
He said the Government would need to relax legal restrictions on where pension money can be invested.
Mr McLoughlin added that trustees could be persuaded to act in a socially responsible way and to put money into an infrastructure fund.
He warned the controversial levy may be impossible to implement as large numbers of members of schemes were writing to their trustees demanding that no money be taken from their pension to pay it.