The bulk of the finances being established under the National Pensions Reserve Fund Bill 2000 will be invested abroad. The Minister for Finance, Mr McCreevy, told the Seanad at the passing of the second stage of the Bill yesterday that "given its large size in comparison to the size of the Irish market, it is inevitable that most of the fund will be invested abroad".

Any dilution of the commercial nature of the investment mandate could seriously compromise the returns achieved by the fund, he said.

"Placing a statutory obligation on the commission to give priority to investment in Ireland could expose it to pressure to make commercially sub-optimal decisions," Mr McCreevy said.

A spokeswoman for the Department of Finance said the Bill was expected to be enacted before the end of the year.

The key elements of the Bill include:

the establishment of the fund to augment the provision of social welfare and public service pensions from 2025 onwards;

a statutory obligation to pay a sum equivalent to 1 per cent of GNP from the exchequer into the fund each year until at least 2055;

the establishment of an independent commission to control and manage the fund;

a prohibition on drawdowns from the fund prior to 2025;

the appointment of the National Treasury Management Agency as agent of the commission in managing the fund;

the transfer of £5 billion (€6.3 billion) from the sale of Telecom Eireann to the reserve fund;

the appointment by the commission of investment managers to invest and manage portions of the fund, and custodians to ensure the safekeeping and security of the assets of the fund.