BELGIUM - The body advising Belgian minister Bruno Tobback on pensions issues is to consider a legal formula to create a level playing filed between new sector-wide pension funds being established under the so-called Vandenbroucke Law and pension insurance companies.
In the formative period the new pension funds are not legal entity and they have until January 1 2007 to decide between two options.
“They can take the form of a limited company, an ASBL, or a mutual assurance association, an AAM,” Karel van Gutte, federal coordinator for internal organisation of the metal workers’ union, Metaal ACV, and a member of Tobback’s pensions advisory council, told IPE.
“But pension funds formulated under these vehicles must pay 10-15% capital gains tax on investment returns whereas pension insurers are exempt from paying tax on returns.”
Van Gutte said the VDB law, named after Tobback’s predecessor Frank Vandenbroucke, opened the possibility of creating a third legal personality that does not yet exist. One of the issues before the advisory body is to decide what should be the characteristics of this third legal body, which currently has the working title of pension association (APV).
At a meeting today, Metaal ACV representatives proposed to the president of the advisory body that it suggest to Tobback that this third option employ an exiting format to overcome the tax problem.
“We already have joint sector bodies, known as fonds de sécurité d'existence, into which employers within a sector pay around 2.5% of gross salaries and which in turn pays it as a contribution to state payments to sector members on unemployment or disability benefit and those who have taken early retirement. The fond de sécurité d'existence is a legal personality and it has the same tax advantages as the insurers.”
Until January 1 2007 the fledging sector-wide pension funds are parked under the umbrella of the fonds de sécurité d'existence. “For example, the pension fund for the metal industry remains inside the sector’s fond de sécurité d'existence as a separate entity,” said Van Gutte, who is also on the advisory board of the metal sector pension fund.
“Because we are within this framework we currently enjoy the same tax advantages. But we will lose them when, by the beginning of 2007, we have to opt to be established as an ASBL or an AAM. And then we will pay.
“But we are suggesting that the fond de sécurité d'existence format should be the APV for sector pension funds. All it needs is an amendment that says we can have ASBLs, AAMs and adds that the existing fonds de sécurité d'existence can take on the further task of being sector pension funds.
“Pension funds don’t want to be treated any better than the insurers but we don’t want to be treated any worse,’ Van Gutte said.
“We want the same rules for everyone. Otherwise the danger is that the pension funds will base themselves in Luxembourg or Dublin to escape the tax problems.”