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Cross-border lessons

The 2010 comedy film Rien à Déclarer focused on the rivalry between a pair of customs officers either side of the pre-Schengen Franco-Belgian frontier. Their brand of pettiness makes us laugh today and post-Schengen, as you shoot over the border on the Thalys train, virtually the only sign that you have entered another country is the change of mobile phone service provider.

Some 20 years since the creation of the single market, Europe has made enormous strides in cross-border trade and investment. But there have been no high profile cases of cross-border pension relocation, despite the attempts of Ireland, Belgium, Luxembourg and the Netherlands to create an attractive regulatory framework.

An EIOPA consultation paper from last December notes that the lack of co-ordination in social and labour law is the greatest hindrance, next to the general lack of demand and the requirement for full funding.

Any real stirrings of interest have largely been driven by regulatory arbitrage.

One or two large pension funds have threatened, over the years, to decamp to Belgium and Luxembourg, but soft pressure from the home regulator can see that these plans do not come to fruition. Such pressure can be carefully exerted to ensure that no EU laws are breached.

As we relate in this issue, France’s UMR has recently abandoned a plan to relocate its Corem pension fund in Belgium.

Ten years on, what further conclusions can be drawn from the 2003 IORP Directive? Aside from allowing multinationals to create efficiencies in their pension arrangements, the Directive was conceived with several aims in mind, among them the furtherance of good practice standards and the promotion of better labour market mobility. But EU cross-border labour mobility, other than economically driven migration from poorer member states to richer areas, is still too low.

Language barriers and the recognition of certain professional qualifications far outstrip occupational pension provision as factors hindering cross-border migration. Occupational pension issues barely feature as an impediment, or incentive, to labour mobility within the EU.

But the lack of demand for cross-border vehicles does not make the 2003 IORP Directive a failure. It has created a sea-change in supervisory practice in a number of countries and has much to commend it. Its promotion of prudent person standards and sounder policy makes it a good foundation for the promotion of occupational pension structures in the majority of Europe where occupational pensions are lacking.

IORP II would do well to promote principles-based good governance standards, and well-designed workplace DC pensions that would serve Europe’s hard working blue collar cross-border migrant workers.

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