–Minister: Move To Help Plug Deficit, Make Irish Mkt More Attractive

LONDON (MNI) – The Irish government has agreed reforms that will
see the country pension funds able to price its annuities based on its
sovereign bonds and move away from the German bond market as a
benchmark.

The Irish Minister for Social Protection Eamon O Cuiv said the
proposal was voluntary for pension schemes but could help to plug the
country’s deficits and lead to higher returns on Irish debt.

It could assist pension schemes wishing to switch to the new
defined benefit model which is currently under development.

The minister said that the funding standard would be amended to
enable pensions schemes that purchase bonds or sovereign annuities to
reprice their liabilities.

German bonds have been used to date, due to their longer life
cycle as well as the more reliable credit rating.

The vast majority of Irish pension funds invest in bonds that are
non-Irish bonds, leading to an outflow of money from the state – money
which would be better invested in Ireland.

The minister said that there was no risk of Ireland defaulting on
its sovereign debt and that the initiative will assist the Irish
exchequer by bringing pension funds back home at a time when Irish
pension funds hold less than 5% of their assets in domestic sovereign
debt.

The comments appeared in Investment and Pensions Europe, a leading
international pensions publication.

Earlier this year, Oliver Whelan, the head of funding & debt
management at the National Treasury Management Agency (NTMA), told an
audience in Brussels that Ireland is exploring the idea of issuing an
inflation-linked bond in 2011.

Speaking at a panel of delegates at the AFME/EDPA European
Government Bond Conference, Whelan said the potential linker issue
will be linked to Irish inflation. This would be Ireland’s first-ever
linker bond and has been brought to the agency’s attention by the
industry.

As to the likely maturity, Whelan said, “We will be guided by
investor demand in that space, but you would expect demand from that
sector to be long-dated rather than short-dated.”

–London newsroom: 00 44 20 7862 7494; email:nshamim@marketnews.com

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