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Future of Cross-Border Pension Plans in Europe: Innovations and Challenges

Explore the current state, potential developments, and future of cross-border pension schemes in Europe. Learn about legal frameworks, investment pooling, business types, interested parties, drivers, and key factors influencing location choices. Uncover the impact on regulations, obstacles, and the role of Ireland as a prominent pensions hub. Discover the Pan-European Pensions Task Force initiatives and upcoming steps in implementing the EU Pensions Directive.

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Future of Cross-Border Pension Plans in Europe: Innovations and Challenges

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  1. Cross-Border Pension Plans in Europe Where Do We Go From Here? Anne Maher Chief Executive The Pensions Board Ireland 29 August 2006

  2. Agenda Cross-Border Plans • What is now possible? • How is this likely to develop? • Where will these plans locate? • Next steps 2

  3. What is Now Possible Legal Background • 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 3

  4. What is Now Possible EU 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 4

  5. What is Now Possible • Investment pooling cross-border - already possible and happening • Pooling of liabilities • Pooling of administration 5

  6. Development of Cross-Border Business Types of Cross-Border IORPs • Existing plans which relocate • New employer sponsored cross-border plans • New commercial cross-border arrangements 6

  7. Development of Cross-Border Business 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 7

  8. Development of Cross-Border Business 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? 8

  9. Development of Cross-Border Business Drivers • Commercial Beneficiaries • For-profit IORPs providers • Advisers to multinationals • Potential providers of cross-border management and administration services 9

  10. Influence on Cross-Border Business 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 10

  11. Impact on Cross-Border Business Regulation • Balance between reasonable cost and member protection • Transparent/open environment • Reasonable level of investment freedom • Respected regime • No regulatory arbitrage 11

  12. Impact on Cross-Border Business Obstacles • Social and Labour Law • Tax • Defined Benefit Funding Standards • Pension Reform • Member State attitude • Inexperience • First mover disadvantage 12

  13. Location of Cross-Border Business • Any Member State • Attraction of Luxembourg, Ireland, UK, Dutch pooling vehicles? 13

  14. Ireland as Pensions Location • 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 14

  15. Ireland as Pensions Location • 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) 15

  16. Next Steps • Implementation of Directive by all EU Member States • 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 16

  17. In Conclusion • Pensions Directive • Is first step in single market for pensions • Provides a framework for change • Investment/asset pooling is happening • Liability pooling and centralised administration are next steps • Full Pan-European Pension Funds • Will take time • But WILL come about 17

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