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EFRP sees E10bn savings from new pension model

EUROPE – The European Federation for Retirement Provision (EFRP) has unveiled an update to its cross-border occupational pension model, the EIORP, which it says could lead to annual savings for the European pension fund industry of up to 10 billion euros.

The EFRP has released an 84-page proposal entitled “European Institutions for Occupational Retirement Provision”. It called the proposal for ‘EIORP 2005’ a “practicable concept for a pan-European pension fund”. It presented the plan to the European Commission’s Internal Markets commissioner Frits Bolkestein yesterday.

The EFRP estimates that the proposal could see 15 basis points saved from improved investment costs, administration, compliance, expatriate schemes and better governance. “An additional 30 basis points could be saved by better investment returns and the ability to smooth out the ups and downs in solvency capital requirements by having one fund of assets and liabilities.”

“In total the overall savings could be estimated at 45 basis points,” the EFRP says. “For the pension funds' industry this amounts up to 10 billion euros annually. Even if only part of these savings were realised, the benefit for Europe's competitiveness would be significant.”

EFRP chairman Alan Pickering said: “Our EIORP 2005 proposal addresses the needs of millions of European citizens and their employers.”

“It provides a solution for both mobile and non-mobile employees. The companies and workforces which can benefit from EIORPs may be small or locate exclusively in a single member state.” But multinational companies were most likely to be “in the first wave” of EIORP pioneers.

“In short EIORP 2005 is for everyone,” Pickering said.

A key aspect of the plan is that no tax harmonisation is required. The report added: “The EFRP proposal provides a solution which ensures that member states retain both effective fiscal control and their tax revenue. Its starting point is that the national section for a member state in which the EIOPR is active is to behave and be treated exactly as if it were an IORP located in that state.”

“Tax neutrality is achieved by ensuring that the national section applies the tax rules of its corresponding member state.”

“It is important to note that the EIORP as a legal structure located in one member state, its home state, remains liable to tax in that state and mush be able to benefit under bilateral tax treaties arrangements with those host states in respect of which the EIROP operates national sections.”

The new model follows the EFRP’s original EIORP proposal of July 2000. “This new report builds on EU-level developments between 2000 and 2003 in the fields of financial services and taxation.”

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