Ann Powell, investment director of Eagle Star, has a number of priorities as she takes over as chairman of the Irish Association of Investment Managers for the next year.
But there is one concern where she visibly bristles - the IAIM's belief that An Post enjoys an unfair advantage over fund managers with the rates it offers on saving certificates and savings bonds. The investment industry has been critical for many years over what it sees as An Post's competitive advantage, but the IAIM - together with the Irish Bankers Federation - is planning a fresh approach to the Minister for Finance.
And even the changes introduced by Minister for Finance, Mr McCreevy have only gone part of the way to restoring the level playing pitch that the investment managers believe they need to compete with An Post. "We're pleased he has taken a step in the right direction but much more needs to be done to bring a level playing field," says Ms Powell.
According to Ms Powell, the rates offered by An Post represent poor value for the exchequer. While An Post certificate and bond interest rates have been falling in line with the trend of falling rates generally, the returns offered are still far higher than the Government offers on its own gilts.
The IAIM accepts that when the Government has a high exchequer borrowing requirement, there may be an argument for not over-relying on markets for funding. "But when the EBR is low and even heading for a surplus, that rationale is clearly no longer valid. Quite simply, the Government - through An Post - is offering higher rates than it needs to," says Ms Powell.
The IAIM also believes that the way the National Treasury Management Agency (NTMA) treats the accrued interest disguises the true cost of Government funding through the An Post schemes. "The NTMA does not hold a reserve for the full amount of the accrued interest. A reserve of £351 million at the end of 1996 was just 25 per cent of the total accrued interest. On gilts, the Government must pay interest each year while it may not actually accrue interest from year-to-year. This hides the cost of Government funding and debt outstanding as a percentage of GDP."
But it is not simply the cost of exchequer borrowing through An Post that rankles with the IAIM. The association believes that An Post is given a competitive advantage through the rates it offers and its emphasis on the taxfree nature and confidentiality of saving certs and bonds.
"The big question is where the money going into savings certs and bonds is coming from. Amounts of £60,000 to £120,000 going into savings certs and bonds is perhaps encouraging people in the black economy to get relatively high interest rates tax-free at the expense of other taxpayers," says Ms Powell.
The IAIM is recommending that individual investors be allowed a maximum of £5,000 in any particular issue of savings certs, and that the interest rate may be made variable - possibly linked to three-month interbank rates. At a more general level, Ms Powell accepts that her members have still a major job to educate the investing public about the benefits of both short-term and long-term financial planning, and in particular investing for their pensions. "In a low interest rate environment and strong economic growth, people have real savings and are in a stronger position to look after long-term financial needs such as pensions," she says.
This need to educate an increasingly younger workforce in pension planning is becoming more important as new companies - especially the multinationals - opt for defined contribution pension schemes rather than the defined benefit schemes that operate in longer-established industries.
"Most of the multinationals coming to Ireland like Dell and Intel have young workforces with defined contribution schemes. Members of these sort of schemes now have to make up their own minds on topping up their pensions, they are no longer assured of getting a specific proportion of their final salary when they retire."
Ms Powell adds, however, that despite the move towards defined contributions, it is still a major task getting younger workers interested in pension planning.
"Many young people still have the view that pension planning is for older people and that is a problem that the entire industry still faces," says Ms Powell. "It's hugely important that investment managers get their message across, both for investing for short-term and longterm saving, especially in a stable low interest rate period," she says.
With the National Pensions Initiative expected to be published within a matter of weeks, the IAIM is also pressing for some fundamental changes in the way pensions are paid for and paid out.
"I would like to see the National Pensions Initiative recommend more freedom for the investment of pension savings, I'd like to see the creation of personal retirement accounts where people receiving pensions could opt to invest in real assets.
"We would hope to see a move away from the situation where people simply buy an annuity and so lock themselves into a fixed position. There should be more flexibility which would allow people put a certain proportion of their pension into a personal retirement account when they retire. One hundred per cent annuities should not be a forced decision on retirees."
On privatisation of State assets, the IAIM chairman notes that so far only Irish Life and Greencore have been privatised. "The companies have benefited, the State has benefited and the markets have benefited from those privatisations," she says, but warns, that with EMU meaning that the liability base of pension funds will changes from pounds to euros, the Government is missing the opportunity of selling State assets when institutions have pound liabilities and Irish people want to invest in them. They're missing out on a natural investor base.
"At the moment, the only way people like us can invest in Telecom Eireann is to invest in either of the minority shareholders, KPN or Telia. Privatisation is happening all over Europe - France Telecom, Telecom Italia - but we've done virtually nothing about it. This should be seen as the way forward."
Some of the Budget measures have been warmly welcomed by the IAIM, notably the halving of the capital gains tax rate to 20 per cent and the cut in corporation tax.
"We're delighted with the CGT cut," says Ms Powell. She attacked, however, the decision to halve and eventually eliminate tax credits on dividends and said it was "a retrogressive step".
