IRELAND - Plans by Ireland's National Treasury Management Agency (NTMA) to issue index-linked and amortising bonds have been warmly welcomed by the Irish Association of Pension Funds, which nonetheless warned that work was still needed to create a coherent regulatory framework.

Speaking with IPE after the NTMA announced it would issue long-dated bonds with maturities of up to 35 years, the pension association's chief executive Jerry Moriarty said the shift in strategy demonstrated an understanding as to why schemes had such a small stake in domestic debt.

"One of the issues about why schemes haven't been holding any amount of Irish bonds in recent years has been that they are not of the type that is particularly suited to matching liabilities," he said, adding that some schemes had shown "strong interest" in index-linked paper.

Moriarty added that one of the remaining issues was that the new issuances did not tie into the existing guidance on the funding standard, with schemes benefitting more for purchasing sovereign annuities than holding Irish bonds directly.

"The NTMA has certainly done what they are capable of doing, but there is still work that needs to be done with both the Pensions Board and the government on the regulation side, and how it all fits together," he said.

However, Eircom group pensions director Jim Foley added that other issues would be equally important for his scheme and a number of other schemes.

"It comes down to what the price is of the yield and where it fits in the overall investment strategy," he said.

He added that the €2.9bn Eircom Main Superannuation Fund had last year completed a de-risking programme that saw it cut its equity exposure by more than in half, leaving more than 60% in fixed income, with only 34% in equities and the remainder in property, forestry and venture capital.

Foley added that this high exposure to matching assets was not the only reason the fund would be waiting to see how the Irish bonds performed, with it being one of the 20% of schemes that complied with the current funding standard.

"The new funding standard, the amortising bonds and sovereign annuities, they are more positioned for the schemes that have a deficit and have to put in funding proposals or restructuring proposals - there isn't currently the same pressure point for us," he said.

No Irish insurance company has so far committed to issuing sovereign annuities, with the Pensions Board recently only saying that several companies were under consideration.

A spokeswoman at Irish Life & Permanent confirmed that it was still interested in issuing the new annuity product, but declined to comment further.

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