European Union Pensions Directive:
One Year On
Anne MaherChief Executive
The Pensions Board1 November 2006
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AgendaAgenda Background
Progress
What is now possible?
How is this likely to develop?
Where will these plans locate?
Next steps
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BackgroundBackgroundLegal
EU aim to achieve Single Market for pensions
EU Communication on “The Elimination of tax obstacles to cross-border provision of occupational pensions” (April 2001)
EU Directive 2003/41/EC on “the activities and supervision of Institutions for Occupational Retirement Provision” known as the “Pensions Directive” (September 2003)
The Pensions Directive to be implemented into Member State legislation by 23 September 2005
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BackgroundBackgroundEU Pensions Directive Principles
Sets framework for pension scheme supervision
Effectively sets common minimum level of supervision
Moves towards freedom of investment for pension schemes
Facilitates cross-border pension schemes
Provides possible legal framework for Pan European pension schemes
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ProgressProgress Slow implementation by Member States
• 20 with full notification• 2 with partial notification• 3 with no notification• EU Commission taking legal action to enforce
Tax infringements in 18 Member States• Dividend and/or interest taxation• EU Commission pursuing in European Court
Committee of European Insurance and Pension Supervisors (CEIOPS) supervising implementation
Budapest Protocol agreed between pension supervisors
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What is Now PossibleWhat is Now Possible
Investment pooling cross-border - already possible and happening
Pooling of liabilities
Pooling of administration
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Development of Cross-Border Development of Cross-Border BusinessBusiness
Types of Cross-Border IORPs
Existing plans which relocate
New employer sponsored cross-border plans
New commercial cross-border arrangements
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Development of Cross-Border Development of Cross-Border BusinessBusiness
Who is Interested
Multinational Employers
For pooling or merging
Employers with Existing Pension Plans
For regulatory or financial advantage
Commercial IORPs Providers
Looking to sell pensions cross-border
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Development of Cross-Border Development of Cross-Border BusinessBusiness
Reasons to relocate
Multinational employer Better governance/control Single governance regime Economies of scale/cost savings Facilitate corporate change/culture Accommodate mobile employees
Single employer/single country plan Regulatory/supervisory regime? Financial advantage?
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Development of Cross-Border Development of Cross-Border BusinessBusiness
Drivers
Commercial Beneficiaries
For-profit IORPs providers
Advisers to multinationals
Potential providers of cross-border management and administration services
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Development of Cross-Border Development of Cross-Border BusinessBusiness
Influence on Choice of Location
Tax arrangements
Investment opportunities
Pension tradition/services available
Availability of tried and tested pension skills/resources
Regulatory/compliance structures and environment
Ability to accommodate countries outside EU
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Development of Cross-Border Development of Cross-Border BusinessBusiness
Obstacles Social and Labour Law Tax Defined Benefit Funding Standards Pension Reform Member State attitude Inexperience First mover disadvantage
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Location of Cross-Border BusinessLocation of Cross-Border Business
Any Member State
Attraction of Luxembourg, Ireland, UK, Dutch pooling vehicles?
Belgium
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Location of Cross-Border BusinessLocation of Cross-Border Business
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Ireland Tax arrangements
• Irish law incorporates cross-border tax reliefs Investment opportunities
• Common Contractual Fund (CCF) Pension tradition/services available
• Ireland has long established private pension structure Availability of tried and tested pension skills/resources
• Investment, Actuarial, Accounting, Legal, Benefit consulting, Benefit administration, Compliance skills available in Ireland
Regulatory/compliance regime• Acceptable and balanced regulation by open and accessible
regulators supervisors in Ireland Ability to accommodate countries outside EU
• Global services available in Ireland
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Location of Cross-Border BusinessLocation of Cross-Border Business Ireland
Pan-European Pensions Task Force Examining opportunities in international pensions area
Will facilitate initiatives/changes
Suite of asset pooling vehicles Unit Trust (Fixed Income Investments)
Limited Partnership
UCITS CCF (Equities Investments)
Non-UCITS CCF (Alternative Investments)
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Next StepsNext Steps Implementation of Directive by all EU Member States
Resolution of tax issues
Clarification of some Directive requirements
Protocol in operation between Member State pension supervisors
Consideration and decision on location by pension scheme sponsors and commercial providers
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