Cross-Border Pension Plans

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• Cross-Border Pension Plans
• in Europe
• Where Do We Go From Here?

Anne Maher Chief Executive The Pensions
Board Ireland 29 August 2006
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Agenda

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

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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

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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

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What 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 Business

• 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 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

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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?

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Development of Cross-Border Business

• Drivers
• Commercial Beneficiaries
• For-profit IORPs providers
• Advisers to multinationals
• Potential providers of cross-border management
  and administration services

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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

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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

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Impact on Cross-Border Business

• 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 Business

• Any Member State
• Attraction of Luxembourg, Ireland, UK, Dutch
  pooling vehicles?

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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

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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)

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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

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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

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