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New ‘Future Ireland’ fund will become €100bn reserve for spending over decades

The Government is to squirrel away more than €10bn worth of windfall corporation tax receipts next year into two new investment funds.

The bulk of the money will go towards a €100bn ‘Future Ireland Fund’ (FIF) to pay for pensions, healthcare and other costs post-2040, with a smaller, €14bn, envelope to spend key infrastructure projects this decade.

It includes the €6bn that has already been set aside in a rainy day fund, known as the National Reserve Fund, which is to be dissolved and split between the two new envelopes, with the bulk (€4.1bn) going to the longer-term FIF.

The amount being set aside is just under half of the next year’s estimated corporation tax take of €24.5bn.

The Department of Finance believes that around half of Ireland’s corporation tax receipts are “windfall” in nature, meaning they are unexplained and may not be repeated.

The Future Ireland Fund is to be built up over the next 11 years and used to pay for future pensions, healthcare or climate-related costs, though that won’t be set in stone, and it will be up to the Government of the day to choose.

It can’t be spent until 2040.

After ploughing in an estimated €75bn into the fund – via set payments of 0.8pc of GDP per year, depending on the state of the economy – the Department of Finance hopes to raise around €100bn by investing in long-dated assets abroad.

The fund will not invest in domestic assets such as Irish sovereign bonds.

A second, smaller pot, known as the ‘Infrastructure, Climate and Nature Fund’ will be created by setting aside €2bn per year and up to €14bn in total to spend in the near term.

The money can be drawn down after 2026 but only in part. It is to be used to upgrade climate, tech or other infrastructure, and can also be used in the event of a future downturn, as a kind of rainy day fund.

Because the Government intends to draw down money from the second fund sooner, the money will be invested in shorter-dated assets, earning less interest, but which could include Irish bonds.

The money in the funds comes on top of the €165bn that is to be invested in green energy, broadband, housing and other infrastructure under the National Development Plan out to 2030.

And it is in addition to the €15bn Ireland Strategic Investment Fund, which was created almost a decade ago from the remnants of the old pension reserve fund, will remain in place to invest in Irish businesses.

The funds will be managed by the National Treasury Management Agency.

Source: Irish Indpendent