Donal O'Connor: Anglo Irish prevented by law from tapping into lucrative pension funds

Nationalised lender Anglo Irish Bank may make representations to the government to change the law in relation to pensions as the bank is being prevented from going after the millions of euro accumulated in the private pension funds of major customers who have defaulted on their loans.

Private pension funds are traditionally non-recourse to banks, but several financial institutions have been trying to find ways to access some of the funds, which can amount to several million euros. At present no pension fund over €5.4m can qualify for tax relief. But before recent ceilings came in, self-administered funds contained far larger sums.

The Sunday Tribune understands Anglo in particular has found that several high-net-worth individuals claim to have no funds available to discharge their debts, yet maintain very large private pension plans. The bank last week declined to comment on whether it would seek a change in the law, but said it was aware of the issues involved.

The bank is not allowed to request the defaulting borrower to release or transfer the funds in any way to the bank under current legislation.

There are 6,500 self-administered schemes in the country, but the Revenue Commissioners do not have figures on how much money is in them.

Pension contributions are not taxed when the money is being invested, but pensions are taxed when pensioners are being paid.

Occupational funds cannot borrow, but self-administered funds can. The Pensions Ombudsman claimed recently that many funds had borrowed in recent years to buy property, shares and other assets that have dropped in value.