The National Pension Reserve Fund has been officially introduced by the Minister for Finance. The fund, designed to pay public service and social welfare pensions from 2025, already has more than £5 billion (#6.35 billion) to be invested.
The Minister has committed future governments to contributing at least 1 per cent of gross national product annually, whatever the economic circumstances.
According to Mr McCreevy, the proportion of those working to those aged over 65 is projected to fall from five-to-one to two-to-one by mid-century.
"If we do nothing to anticipate this development now, the consequence will be either that taxes will have to rise dramatically to meet increased pension costs or the value of pensions in real terms will have to be reduced." The fund will be managed by a seven-member commission which will decide on investment strategy over the year.
According to Mr McCreevy, it will probably be the end of the year before the commission decides on a benchmark and an investment strategy.
"Since 8.30 this morning the Minister for Finance has no power to give directions to it or to seek to influence its investment mandate in any way."
The commissioners were likely to have some conflicts of interest, he said. "Persons of this calibre, who will often have other business interests, are likely to have conflicts of interest on occasion. I have already discussed this issue with the chairman and he is fully aware of the commission's responsibilities under the Act."
The chairman, Mr Donal Geaney, who is also chairman and chief executive of Elan Corporation, said it would be unusual for the commission to set out specific companies in which to invest. It would decide on a broad strategic direction. If such an occasion did arise, he would absent himself from the discussion.
Other commissioners who are employed in the private sector are: Mr Dan Roth, managing partner of the Emerging Markets Partnership in Washington; Mr Dan Tully, chairman emeritus of Merrill Lynch; and Dr Martin Kolhaussen, chairman of the board of managing directors of Commerzbank.
Other members are: Ms Brid Horan, general manager pensions at ESB, and Mr Robert Curran, retired second secretary at the Department of Finance. National Treasury Management Agency chief executive Dr Michael Somers is an ex-officio commission member.
SIPTU has strongly criticised Mr McCreevy for his "outrageous failure" to ensure both gender balance and trade union representation. "We see this as a deliberate snub to women, to the trade union movement and to the social partnership process."
