The treatment meted out to Europe’s pensions investors wanting to go the pooled fund route varies considerably from country to country.

Some provide substantial tax reliefs, while others offer no such in-ducements. European employers operating cross border can take advantage of these for their local subsidiaries, but generally no advantage is to be gained by investing in these pooled pension funds for investors from an-other jurisdiction, where it is allowed.


The majority of Austrian corporate pensions are funded by book reserves, but where they are not, the corporate pension plan can put its assets in a type of collective investment called Pensionskassen.

The plan does not buy formal units in the Pensionskasse, but owns a share of the growing assets. A company with more than 1,000 employees would have its interest in the Pensionskasse segregated by becoming a sub-account. Winterthur, OePAG, DVP and Vereinigte Pensionskasse are major providers of this type of collective investment.

Of those pension plans which do not rely on book reserves, about 90% of assets are invested in Pensionskassen, estimates Martin Haschke, chief financial officer of Winterthur and its consultancy arm Wintisa. Pensionskassen are tax-exempt, but only available for pensions investment.

The Pensionskasse in turn invests around 80% of its assets in investment funds, known as Spezialfonds. These are similar to Germany’s Spezialfonds, although the legal framework is different. Spezialfonds are available to other institutional investors and they do not have any special tax status. Tax paid depends upon the tax status of the investor.


Companies in Belgium looking for a pooled fund would put their money in a BEVEK - the Flemish abbreviation for investment fund. BEVEKs enjoy tax advantages in that the dividend on shares owned is not taxed before being reinvested, but these funds are available to all, and there is no type of exempt pooled fund reserved for pension assets. A small company in Belgium looking for a pooled investment would normally use a bank as its asset manager which would in turn select various BEVEKs, says Willi Santermans of Mercer Henrijean.


Banks do provide pooled funds which companies can use for pensions investment purposes in Denmark.

But Ole Block, manager of pensions actuary SB Aktuar says about 99% of companies without enough pensions assets to set up their own pensions fund would opt for an insured plan. It could be cheaper, you add risk cover, and it is standard practice,” he says. A new policy would usually guarantee a return of at least 2.5%, he adds.

Pooled funds at the bank are not tax-exempt, in that bond yields are still subject to the Real Interest Tax which limits returns to 3.5% plus the rate of inflation. But pensions contributions to such pooled funds are tax-deductible.


In Finland, there is legal provision for pension plans to pool their assets through what is called a pensions foundation, but this is only allowed where the group of companies have ownership links. Pensions foundations can in turn invest in collective investments such as investment funds, but there is no special provision for tax-exempt pooled pension funds.


France’s pension system is practically all pay-as-you-go, with assets invested for a maximum of 12 months. So there is very little need for pooled pension funds, and they do not exist to any significant degree.

However everything is changing this year, now that the new pension law was passed on February 20. Regulations are expected to follow in June or July, allowing the first pension funds to start operating at the end of the year.


The main vehicles used by companies to hold assets are Spezialfonds, though only a proportion of these are being used by employers to fund their usually book reserved pensions liabilities. At the end of 1996, there were 2,900 of these funds set up holding $290bn in assets, larger than the domestic mutual fund market.The funds are operated by specially authorised companies Kags usually owned by banking and investment groups. Insurance companies are major users of Spezialfonds. Small pension funds are among those setting up these vehicles.There are tax and other ad-vantages to operating these funds. There can be advantages to non-domestic institutions in using Spezialfonds to hold German assets.

Pensionskassen, which are the next most used method of pension provision after book reserves, are able to invest in funds and there are advantages to them in using funds rather than direct equity if they want to increase their foreign share exposures.

Within Germany the need for a pooled pension fund vehicle fund has long been felt and a number of contenders are being discussed ( see page 14).


Tax-exempt pooled funds, or Institutional Funds are available for pension scheme investors. They tend to be specialised, rather than balanced.

Charities are allowed to make use of them as investment vehicles as well as pensions. Consultants such as Mercer and Frank Russell monitor the performance of the funds which are offered by asset management groups such as Robeco. Some UK fund managers are thought to be on the verge of introducing in Holland a type of communal fund with a balanced structure for pensions purposes.


In Ireland, pensions schemes can participate in tax-exempt pooled funds known as Group Pooled Pension Funds. These are also available to charities, though there are other, more conservatively invested funds which also exist for charities.

Group pooled pension funds are provided by banks, insurance companies and private investment companies.

Deborah Reidy, investment consultant at Mercer in Dublin, estimates total assets for group pooled pension funds is less than Ir£2bn, compared with total pensions assets in Ireland of around Ir£16 bn.

These pooled funds have full discretion on what they invest in, according to Irish Pensions Trust, which monitors performance of exempt pooled funds.


Although a law became effective in August 1995 for the establishment of open funds (pooled pension funds) in Italy, regulations governing them have become stuck in the legislative pipeline. Guido Blasco, consultant at Hewitt Associates in Italy, estimates that the regulations may be in place by the beginning of Autumn.

“It’s a mystery how they’re going to work,” he says. For the time being, funds are having to stick with old investment arrangements or remain uninvested, he says. All current pensions investment is generally tax-exempt except for the Replacement Tax - a stamp duty of 12.5% on bond yields.


Pooled pension funds are not very common in Norway. Pensions are usually invested through insurance companies, which in turn offer pooling. Some banks are thought to be making attempts to start offering pooled funds for pensions.


In Portugal, open funds are offered by the major investment management companies for small to medium sized pension funds. From an investment point of view there are similar to segregated or closed funds, though they tend to have a slightly more conservative asset mix, with more bonds and less equity.

They are unitised and tax-exempt as they are exclusively for pensions purposes.

Total assets held within open funds is around 1% of Portugal’s total pensions assets, estimates Bernie Thomas of Watson Wyatt in Portugal. Consultancies including Watson Wyatt monitor the performance of these funds.


There are no pooled funds specifically designed for tax-exempt investors such as pension schemes in Spain, but pension schemes seeking access to a particular foreign market usually do so by means of a unit trust.

One disadvantage of this is that tax is payable on investment income they receive at 1%, while pensions investments are usually not taxed at all. Another drawback, says Ian Hinton of consultancy Aserplan, is that trustees end up paying commission twice - once at 2% to the gestora, or pension fund administration company, and another 2% when the gestora invests in the unit trust.

A small company looking for an investment channel for pensions assets would typically use as insured contract, because then the solvency margin would cease to be an issue.

Some gestoras run pension funds which include assets of more than one pension plan, although these are not flexible in the way that pooled pension funds in the UK are. It is possible to move out of them, although legal ties have to be unbound.


Swedish pensions assets can be invested in pooled funds such as unit-linked insurance products or open equity funds provided by banks, but there is no special provision for pensions clients. They are not tax-exempt and these funds are equally available to tax-paying investors. One drawback for pensions institutions in investing in these funds rather than in the securities directly, is the added cost of extra middlemen, says Peter Dahl of consultancy PFAB.


Institutions in Switzerland can place pensions assets in one of two types of tax-exempt pooled pension fund - a Sammelstiftung or an Anlagestiftung. Sammelstiftungen are generally for smaller companies, typically with between 50 and 100 employees. They have a broad mix of investments including property. Anlagestiftungen confine their investment to financial assets and are the main type of exempt pension fund for larger companies. Anlagestiftungen have fewer costs than Sammelstiftungen.

A third type of pension fund, the Freizugigkeitsstiftung exists for individual pension arrangements.

The funds face the same investment restrictions which apply to any Swiss pension fund, for example, no more than 50% of assets may be invested in equities and property and foreign investment is limited to 30%. The fund also has to have a long-term annual performance guarantee of 4% over time.

Foreign companies are in principle allowed to invest in Anlagestiftungen, says Vontobel Asset Management’s vice president Christof Straessle. But in practice it makes no sense, as tax-exempt investment is only available to Swiss investors, he says.


Two types of legal vehicle exist for the provision of pooled pensions funds in the UK: exempt unauthorised unit trusts and insurance company internal funds. Both provide direct unit-linked investment for pension funds.

Insurance company funds can only be used by UK pensions funds. Other tax-exempt institutions can invest in exempt unauthorised unit trusts.

Insurance company managed funds account for the majority of the market. This is partly because defined contribution schemes require the allocation of assets to individual em-ployees, exempt unauthorised unit trusts can entail an additional administrative burden regarding tax reclaimation.