What Is the National Pensions Reserve Fund?
The National Pensions Reserve Fund (NPFR) was a public pension fund established by the Republic of Ireland. Established in 2001 under the National Pensions Reserve Fund Act, 2000, it supplemented the existing pay-as-you-go public pension system. It was controlled and managed by the National Pensions Reserve Fund Commission, by way of the National Treasury Management Authority.
How the National Pensions Reserve Fund Works
The National Pensions Reserve Fund had a long-term investment horizon. The goal of the fund was to support the monetary needs of Ireland's social welfare and public service pensions from 2025 until at least 2055.
The Government of Ireland made annual deposits of 1% of GNP into the fund. The fund’s investment mandate required it to secure the optimal total return, provided the commission deemed the level of risk acceptable. The commission implemented its investment strategy through a globally diversified portfolio that included quoted equities, bonds, property, private equity, commodities, and absolute return. In 2013, the NPFR became the Ireland Strategic Investment Fund (ISIF).
The NPFR's Conversion
The National Treasury Management Authority (Amendment) Act, 2014, which was enacted on July 26, 2014, converted the National Pensions Reserve Fund into the Ireland Strategic Investment Fund (ISIF). Once established, the NPFR's assets became those of the ISIF.
The decision to convert the NPFR into the ISIF dated to the fallout from the global financial crisis that began in 2008. In 2009, Ireland’s finance ministry determined that it would use some of the NPFR’s assets to help with the financial crisis, as outlined in the Investment of the National Pensions Reserve Fund and Miscellaneous Provisions Act, 2009.
Following initial investments to stabilize Allied Irish Banks (AIB) and Bank of Ireland, which required multiple rounds of public support to weather the market volatility during the crisis, the National Pensions Reserve Fund Commission made the decision to separate the NPRF into two separate portfolios. The NPFR maintained responsibility for the Discretionary Portfolio, while the Directed Portfolio was guided by the Minister for Finance. In Sept. 2011, the government announced the establishment of the initiative that would eventually lead to the ISIF, following necessary changes to the governing legislation.
In December of 2014, all assets governed by Irish law transferred from the commission to the National Treasury Management Authority and became ISIF assets of the ISIF. The NTMA Act enacted in July of 2014 reduced the commission to a single member, the NTMA's chief executive. The ISIF also includes the NPRF’s Directed Portfolio, though that remains the responsibility of the finance minister.