EUROPE - Professional services firm Deloitte has launched a pension pooling offering and said it is working with consumer products group Unilever on implementing pooling in practice.
"Deloitte are currently working with a number of clients including Unilever, one of the founding members of the original consortium, to implement pension pooling in practice," Deloitte said in a release
Deloitte said multinational businesses could save millions of euros with the establishment of a single pooled vehicle.
"Instead of holding underlying investments directly themselves, the international pension funds invest into a pooled vehicle which in turn holds the underlying investments on behalf of the pension plans.
"The benefits can be substantial and include economies of scale, increased governance and oversight through central co-ordination and reduced administration."
The firm said it is working with "a wide range" of multinational firms, custodians and asset managers to implement pension pooling. It has established a worldwide pension pooling tax team under tax partner Gavin Bullock to co-ordinate pension pooling projects.
Bullock stated: "Multinationals have long sought to exploit the potential benefits of pension pooling. However, whilst advances in custodian systems have enabled pooling for limited investments such as global bonds, regulatory, tax and legal barriers have until now prevented pension pooling for equity investments.
Pooling lets firms running pension funds in several countries to 'pool' their assets in a single Pension Pooling Vehicle - which then invests on behalf of the investing funds.
"Every multi-national with pension funds in more than one country should consider implementing a pension pooling vehicle because the benefits can be so substantial," Bullock said.
"One of the main hurdles to pension pooling in the past has been the tax treatment of cross border dividend payments. Critical differences in bilateral tax treaties and variances in withholding tax treatments mean an equity investment is taxed differently depending on the jurisdiction in which it is held."
The group added that the financial benefits of pooling can be "significant". It added that Northern Trust has seen savings for client pension funds. These include:
- An increase of up to 70 basis points on the investment performance of global equities for some subsidiaries.
- A benefit of eight million dollars a year for one local plan through the restructuring of its bond investments into a pooled vehicle.
- Greater benefits from alternative investments.