IRELAND - An early election in Ireland will not derail the launch of sovereign annuity bonds, the Irish Association of Pension Funds (IAPF) believes.
Prime Minister Brian Cowen has been forced to call an election on 11 March after his coalition allies threatened to pull out of the government unless he abandoned plans for a cabinet reshuffle and name a date. The Government agreed to issue new bonds and sovereign annuities following proposals put forward by the IAPF and the Society of Actuaries in Ireland at the end of last year.
Under the plans, the Government will issue 10-15 year bonds, more suited to institutional investors' needs than the current five year notes. Pension schemes could then invest in these sovereign annuity bonds. Irish funds assess their solvency on the market price of annuities, which at present are priced off expensive 10-year German bonds because of their duration, availability and security rating. (Global Pensions: 8 December 2010).
IAPF vice chair Maurice Whyms said it was highly likely the sovereign annuity bonds plan would continue as their issuance had already passed into legislation.
He added: "It is not a proposal anymore; it is a piece of legislation which indicates that it will still go ahead. It delivers revenue to the State and helps the funding of the pension scheme so it is unlikely the new government would stop it."
The publication of the new defined benefit model and the funding proposals for DB schemes have also been delayed until February. Both had originally been due in November, but were pushed back to January to allow pension funds extra time to amend their pension plans to take into account the use of the new bonds.
Whyms said: "Given an election so soon, it is possible certain aspects could get delayed. If there are proposals that require legislative change then it is almost impossible to see how they will go through before March, but I could be wrong. There is still some detail to be filled in like what the NTMA is supposed to be issuing and the funding standard; this aspect is perhaps up in the air because of the political front."
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