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Law firm issues warning on pension directive

EUROPE – Law firm Hammonds - a member of the European Federation for Retirement Provision - has issued a warning that key elements of the European Union’s pension fund directive are under threat.

At issue are funding rules, the prudent person principle and the operation of non-domestic funds.

“The funding rules are the most contentious parts of the directive,” the London-based firm’s international benefits practice said in a newsletter. “What is ‘full funding’?”

The firm also highlighted that some member states may be taking a “restrictive” approach to the ‘prudent person’ investment rules enshrined in the directive, which has to be implemented in just under a year.

The firm’s comments follow a meeting, attended by the firm, on the implementation of the directive on Institutions for Occupational Retirement Provision in Brussels recently.

It revealed that it emerged at the meeting that some European Union member states may discourage non-domestic pension schemes.

“Others may be taking action that could discourage the operation of non-domestic funds within their jurisdiction,” the London-based firm said.

Hammonds said the European Commission is being “unusually proactive as it believes it has an important role to play with regard to the implementation of the directive”. It stated that the Commission would be “reviewing” the progress of member states.

The firm said that the only text currently dealing with cross-border plans is the UK’s forthcoming Pensions Bill.

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