Ireland’s National Treasury Management Agency (NTMA), the government body responsible for the management of future state pension provision, has selected ABN AMRO Mellon to provide global custody services for the country’s National Pensions Reserve Fund. As well as providing core custody services, ABN AMRO Mellon will deliver securities lending, cash management, compliance monitoring, and analytics for the Fund, which currently stands at some EUR8.0 billion. Bacon & Woodrow acted as the consultant for the global custody mandate.
The National Pensions Reserve Fund was established in October 2001 to meet part of the escalating Exchequer cost of social welfare and public service pensions, arising from the projected ageing of the population. Ireland’s ratio of working age population to pensioners currently stands at 4:1. By the year 2040, this will decrease to 2:1 – a pattern repeated to various degrees throughout Europe.
There is a mandatory commitment to a funding rate of one per cent of gross national product annually and money accumulating in the Fund can not be withdrawn until 2025.
Dr. Michael Somers, Chief Executive of the NTMA, comments: “The selection of a global custodian is a critical facet of the NTMA’s plans for the management of the Pensions Reserve Fund. ABN AMRO Mellon has demonstrate its ability to provide a quality service that meets with our high expectations for a global custodian. We look forward to working with them.”
“Ireland’s proactive approach in tackling this issue now is to be applauded,” adds Nadine Chakar, Managing Director of ABN AMRO Mellon. “Increasing old age dependency rates and the additional burden they are creating for governments across Europe cannot be ignored. The fact that only seven per cent of EU workers are covered by corporate pensions, and less than one per cent by private schemes shows how seriously governments should be taking this issue.”
Merrill Lynch, in its recent ‘Pension Reform Barometer’, identified Ireland as the most advanced EU member state in terms of the overall progress that it has made in reforming its public retirement system. Ireland scored highly due to low public debt, best performance in debt reduction and the highest living standard for pensioners.