The Future Structure of Pan- European Pension Funds and Plans by Geoffrey Furlonger London, March 2004 Current Position in EU • The law is now relatively clear, but how will EU Member States behave? Current Position in EU • States who do NOT discriminate against cross-border pensions or probably will not in near future - The Netherlands - Germany - Finland - Sweden - The UK ? Note: PEPGO and AMS application to UK Tax Authorities - Ireland - France !? - Spain ! • I.e. Pan-European Pension Funds possible in very near future. Structure of Pan-European Pension FUNDS Single Fund in Luxembourg NL Plan UK Plan Irish plan German Plan in NL in UK in Ireland in Germany Structure of Pan-European Pension PLANS (incorporating pan-European fund) Single Fund e.g. in Luxembourg Common Plan rules Schedule A Schedule B Schedule C Schedule D Variations Variation Variation Variation for NL for UK for Ireland for Germany Note: Example Multicompartimental SEPCAV or ASSEP in Luxembourg Which Country for Centre for Pan-European Pension Funds / Plans? Favourites 1. Luxembourg 2. Ireland 3. The Netherlands ? 4. The UK?? 5. Offshore centres – Jersey, Guernsey, Isle of Man etc.? Luxembourg Advantages Disadvantages 1. International legislation 1. Little experience in already in place administration of 2. Low Tax Environment international pension 3. Multi-lingual plans prior to 1999 4. Financial Sophistication Ireland Advantages Disadvantages 1. Legislation in place for 1. Not Multilingual pooling pension final 2. Little experience in assets administration of 2. Long history in Pension international pension Fund Administration plans 3. Financial Sophistication 4. English is main language (attractive for U.S. multinational) 5. Tax Environment? The Netherlands Advantages Disadvantages 1. Strong history in 1. International pension successful pension legislation not yet in fund regulation and place administration 2. High National Tax 2. Financial Sophistication Environment (but is 3. Liberal Tax Regime this important for Pan- 4. Multi-lingual (?) European Pension Plans?) The United Kingdom Advantages Disadvantages 1. Long history in 1. International pension pension fund legislation not yet in regulation and place administration 2. Unfavourable financial regulation e.g. tough 2. Financial minimum funding sophistication requirements 3. Liberal tax regime ?? 3. Unfavourable tax regime ?? Offshore Centres e.g. Jersey, Guernsey • Long experience in administration of international pension plans but • Outside scope of EU Directive and ECJ tax rulings – therefore cannot offer legal tax efficient and tax compliant pan-European pension plans. Case Study • Finnish Multinational • Static employees in Finland and the Netherlands • D.C. plan based in Luxembourg (SEPCAV) based on EU Directive and ECJ cases • I.e. "test-tube" tax approved pan-European Pension Plan Finland Employees + Sponsors The Netherlands Employees Luxembourg SEPCAV Use of Group Life Insurance to Fund Pan-European Pensions • Note. Group-life insurance policies regulated by 2nd and 3rd EU life insurance directives might be used to fund pan-European pension plans and thus avoid restrictions of EU pensions (IORP) directive. • Tax position not yet clear. Conclusion • Take- Off for tax approved pan-European Pension Plans for Multinationals in very near future.