Reseerve Funds

Table of Contents

Purpose of the Act

The purpose of the Future Ireland Fund and Infrastructure Climate and Nature Fund Act 2024 is to provide for the establishment of two new funds to support future expenditure by the State. The Future Ireland Fund is intended to support State expenditure in any year from 2041.

The Infrastructure, Climate and Nature Fund is intended to support State expenditure from 2026 or in any year thereafter, in the event of a significant deterioration in the economic or fiscal position of the State, and between 2026 and 2030, to support State expenditure on certain environmental projects.

The 2024 Act also provides for the control and management of those funds by the National Treasury Management Agency, and for the dissolution of the National Surplus (Exceptional Contingencies) Reserve Fund and the transfer of the assets of that Fund to the Future Ireland Fund and the Infrastructure, Climate and Nature Fund.

The Act also provides for certain amendments to other enactments, the repeal of the National Surplus (Reserve Fund for Exceptional Contingencies) Act 2019 and for related matters.

The terms “FI Fund” and “ICN Fund” are used to refer to the Future Ireland Fund and Infrastructure, Climate and Nature Fund respectively. The term “relevant GDP” is used in the Act to calculate the level of contribution to the FI Fund in any year. By way of example, any payment made to the FI Fund in 2026, would be allocated in the Budget in 2025, and be based on the 2024 GDP figures.

Future Ireland Fund

Part 2 contains provisions in relation to the establishment and the operations related to the Future Ireland Fund (FI Fund) and the “Investment Policy” and the “Investment Strategy” of the FI Fund. It also provides for payments in and payments out of the FI Fund.

The “Value of the FI Fund capital” is the total value of all payments into the FI Fund and all assets transferred to the FI Fund, valued as at the date of each such payment or transfer. The actual amount of the FI Fund capital is relevant to payments out of the FI Fund, as withdrawals from the Fund may not breach that figure, other than where specific circumstances arise.

The FI Fund’s purpose is to “support in a consistent and sustainable manner, State expenditure in 2041 or any year thereafter”. There are known and unknown costs to be faced by the State in the future, and the resources of the FI Fund may offset some of the required additional expenditure, while also seeking to ensure that payments of similar amounts can be made each year from 2041 to the Exchequer. The FI Fund will be owned by the Minister for Finance and that the National Treasury Management Agency shall manage and control it.

FI Investment Strategy

The 2024 Act sets out the investment policy for the FI Fund. The assets are to be held or invested by the National Treasury Management Agency on a commercial basis, so as to seek to secure to secure the optimal total financial return as to both the income and the capital of the FI Fund. In doing so, the National Treasury Management Agency shall have regard to:

the level of risk to the assets of the FI Fund that the National Treasury Management Agency considers appropriate to the purpose of the fund, including any such risk posed by environmental, social or governance (ESG) matters of relevance to such performance, and
the likely timing of payments out of the FI Fund.

This reflects the policy intent regarding the incorporation of ESG matters in the investment process for the FI Fund. The policy takes into account the FI Fund’s purpose to contribute to State expenditure from 2041 in a consistent and sustainable manner.

The assets of the FI Fund may be held or invested in or outside the State. All income, capital and other benefits received through holdings or investments of the FI Fund shall be paid into the fund for reinvestment.

The National Treasury Management Agency shall determine, monitor and keep under review the investment strategy for the assets of the FI Fund, for the purpose of holding and investing the fund, in accordance with the overarching investment policy. The investment strategy will be required to include appropriate benchmarks, a description of the classes of assets in which the FI Fund may be invested in and a description of how the National Treasury Management Agency will have regard to risk posed to the assets by relevant ESG matters, including a description of the basis on which the National Treasury Management Agency identifies categories of investments in which the FI Fund shall not be invested in light of such.

In determining and reviewing the strategy, the National Treasury Management Agency shall consult the Minister for Finance and Minister for Public Expenditure, National Development Plan Delivery and Reform.

Contribution

There are mechanism for contributions to the FI Fund. The Act requires that 0.8% of “relevant GDP” is contributed to the FI Fund from the Exchequer each year between 2024 to 2035. It allows for further payments following a Dáil resolution.There is a mechanism to reduce or pause the payments , where the Minister for Finance is satisfied in any year following an assessment that there has been or is likely to be a deterioration in the economic or fiscal position of the State.

When this happens, the Minister for Finance may recommend to Government to reduce the payment in the subsequent year to 0.4% of “relevant GDP”. Alternatively, where he is satisfied the deterioration is of such a degree that it would not be appropriate to make any contribution to the FI Fund, he or she may recommend to Government that no payment should be made in the subsequent year. A Dáil resolution is required to reduce or halt the contribution to the Fund in a given year.

The National Treasury Management Agency to report to the Minister for Finance on the amount of the investment return the National Treasury Management Agency believes is appropriate to be drawdown in the subsequent year and in each of the four years thereafter. The National Treasury Management Agency is also required to advise on the relationship between the annualised investment return and the annualised cost of general government debt in order to determine whether the Minister for Finance can decide to increase the amount to be drawdown in line.

No payments can be made to the Exchequer prior to 2041. The Minister for Finance may in 2040 (or in any year thereafter) recommend to Government drawdown up to a maximum of 3% the value of the net assets (NAV) of the FI Fund, where the amount would not reduce the value of the FI Fund below the “Value of the FI Capital” in a given year.

Where the State’s borrowing costs are higher than the annualised rate of return on the FI Fund, the Minister for Finance may recommend to Government to drawdown an amount of up to 5% of the NAV, even if this would reduce the value of the FI Fund below the value of the FI Fund capital. Such an increase to the cap is subject to the passing of a Dáil resolution.

There is a mechanism to delay the payment from the FI Fund to the Exchequer where the Minister of Finance has been notified by the National Treasury Management Agency of potential challenges to liquidating assets of the FI Fund.

Infrastructure Climate and Nature Fund

Part 3 of the Future Ireland Fund and Infrastructure Climate and Nature Fund Act 2024 contains provisions in relation to the establishment and the operations related to the Infrastructure, Climate and Nature Fund (ICN Fund). These include the “Investment Policy” and the “Investment Strategy” of the ICN Fund. It also provides the mechanism for payments in and payments out of the ICN Fund.

The purpose of the ICN Fund is to support State expenditure

in any year from 2026, where there has been, or is likely to be in the subsequent year, a significant deterioration in the economic or fiscal position of the State; and
in the years 2026 to 2030, on designated environmental projects.

The ICN Fund is to be owned by the Minister for Finance and the National Treasury Management Agency control and manage it. The Act sets out the investment policy for the ICN Fund. The assets are to be held or invested by the National Treasury Management Agency on a commercial basis, so as to seek to secure optimal total financial return as to both the income and the capital of the ICN Fund. In doing so, the National Treasury Management Agency shall have regard to:

the level of risk to the assets of the ICN Fund that the National Treasury Management Agency considers appropriate to the purpose of the fund, including any such risk posed by environmental, social or governance (ESG) matters of relevance to such performance and
the likely timing of payments out of the ICN Fund.

This reflects the policy intent regarding the incorporation of ESG matters in the investment process of the ICN Fund. It also takes into account the ICN Fund’s purpose.

Investment Strategy of ICN Fund

All income, capital and other benefits received through holdings or investments of the ICN Fund shall be paid into the fund for reinvestment.The National Treasury Management Agency shall determine, monitor and review the investment strategy for the assets of the ICN Fund, for the purpose of holding or investing the fund in accordance with the overarching investment policy.

The investment strategy will be required to include a description of the classes of assets in which the ICN Fund may be invested in, and a description of how the National Treasury Management Agency will have regard to risk posed to the assets by relevant ESG matters, including a description of the basis on which the National Treasury Management Agency identifies the categories of investments in which the ICN Fund shall not be invested in. In determining and reviewing the strategy, the National Treasury Management Agency shall consult the Minister for Finance and Minister for Public Expenditure, National Development Plan Delivery and Reform.

The Future Ireland Fund and Infrastructure Climate and Nature Fund Act 2024 provides that €2B is contributed to the ICN Fund from the Exchequer, in each year between 2025 and 2030. It also allows for further payments to be made in any year by the passing of a Dáil resolution.

Pause and Withdrawal

There is a mechanism to pause the payments. Where the Minister for Finance is satisfied following an assessment that there has been or is likely to be a deterioration of such significance, and where the Government and the Dáil have resolved to halt the payment to the FI Fund, the Minister for Finance may recommend to Government and subsequently propose a Dáil resolution to halt the payments to the ICN Fund for the subsequent year.

There is a mechanism to drawdown from the ICN Fund, where the Minister for Finance is satisfied following an assessment that there has been a deterioration of such significance that it would be appropriate to drawdown from the ICN Fund to support Government expenditure. Between 2024 and 2029, it will be a requirement that the Government shall have approved, and the Dáil shall have resolved on the proposal by the Minister for Finance, to halt the payments to both the FI Fund and the ICN Fund in the subsequent year prior to the Minister for Finance proposing a drawdown from the ICN Fund.

There is a framework for the Climate and Nature element of the ICN Fund. A Minister with general responsibility for a project, may designate that project as a “designated environmental project” for the purpose of this Part, where they are satisfied that the project contributes directly or indirectly, or is likely to so contribute to the reduction of greenhouse gas emissions, an improvement in water quality or an improvement in nature and biodiversity objectives. There are mechanism to drawdown from the ICN Fund to provide resources to the “designated environmental projects”.

The Minister for Public Expenditure, National Development Plan Delivery and Reform shall report to Government specifying the total State expenditure on designated environmental projects that is estimated to be incurred in that year and shall propose an amount he or she believes to be appropriate to be withdrawn from the ICN Fund to the Exchequer. The allocation of the resources of the Fund will take place through the existing budgetary framework. It will be included as voted expenditure for each relevant Department. In a given year, no more than 22.5 per cent of the total value of the ICN Fund as 31 December of the prior year, can be drawn down, with the total amount not surpassing €3.15 Action between 2026 and 2030.

There is a mechanism to delay the payment from the ICN Fund to the Exchequer where the Minister for Finance has been notified by the National Treasury Management Agency of potential challenges to liquidating assets In these circumstances, the Minister for Finance may, subject to securing certain approvals, specify a revised date by which the relevant amount must be paid.

The Minister for Finance is to prepare a review on the operation and effectiveness of the ICN Fund over the period 2026 to 2030, with a view of proposing recommendations on the future of the ICN Fund.

Deterioration Economic or Fiscal Position of the State

Future Ireland Fund and Infrastructure Climate and Nature Fund Act 2024, Part 4 provides for an assessment as to whether there has been or is likely to be a deterioration in the economic or fiscal position of the State.

This decision is made for the purpose of determining whether the Minister for Finance should propose to reduce or halt payments to the FI Fund and to halt payments to the ICN Fund and whether to drawdown from the ICN Fund to support State expenditure for this purpose.

The Irish Fiscal Advisory Council to provide its assessment of the economic or fiscal position of the State and make recommendations to the Minister for Finance on the contributions to the FI Fund and the ICN Fund for the following year.

The Minister for Finance is to determine, each year, whether there has been or is likely to be a deterioration in the economic or fiscal position of the State, based on a range of indicators. The Minister for Finance shall have regard to the Fiscal Council’s assessment in making his own determination.

Management of Funds and Expenses

There are general provisions related to the management and expenses of the FI Fund and the ICN Fund. The Act sets out the general responsibilities of the National Treasury Management Agency and grants it various other powers to hold or invest the assets of the FI Fund and the ICN Fund in accordance with their respective investment policies and strategies.

The Minister for Finance is to provide the National Treasury Management Agency with as much notice of any proposed payment to the FI Fund or to the ICN Fund as reasonably practicable. The National Treasury Management Agency is to endeavour to ensure that the assets of the FI Fund and the ICN Fund are not directly invested in fossil fuel undertakings, with some exceptions.

Certain restrictions are also imposed on the National Treasury Management Agency in relation to indirect investments of the FI Fund and ICN Fund which would involve exposure to fossil fuel undertakings. There are criteria to be reported to the Minister for Finance under Section 13(1) of the National Treasury Management Agency Act 1990.

Various

Future Ireland Fund and Infrastructure Climate and Nature Fund Act 2024 provides for the dissolution of the National Surplus (Exceptional Contingencies) Reserve Fund and the repeal of the National Surplus (Exceptional Contingencies) Reserve Fund Act 2019.

It amends the National Treasury Management Agency (Amendment) Act 2014, to incorporate a specific requirement for the National Treasury Management Agency to have regard to any risk posed by the Environmental Social and Governance matters of relevance to the holding or investment of the assets of the Ireland Strategic Investment Fund and to require the fund’s investment strategy to include a description of how the National Treasury Management Agency incorporates the consideration of such risks, including a description of the basis on which the National Treasury Management Agency identifies categories of investment in which the assets of the Ireland Strategic Investment Fund will not be invested in light of such matters.

It also provides a revised mechanism for the transfer of assets from the Ireland Strategic Investment Fund to align with the process of the FI Fund, including the reporting of a five-year rolling plan.

The 2024 Act provides for the transfer of €2B of the assets of the National Surplus (Exceptional Contingencies) Reserve Fund to the ICN Fund. The balance outstanding to the National Surplus (Exceptional Contingencies) Reserve Fund will then be transferred to the FI Fund. This section also provides for the dissolution of the National Surplus (Exceptional Contingencies) Reserve Fund by order of the Minister for Finance and provides for consequential provisions required in relation to the dissolution of the fund.

The 2024 Act 6 provides for the repeal of the National Surplus (Reserve Fund for Exceptional Contingencies) Act 2019 on the commencement of the provision.

The FI Fund and the ICN Fund shall be exempt from domestic taxation, including the relevant amendments to Tax Law set out in the schedules.