The Luxembourg supervisory authorities have made a series of amendments to 1999’s pension fund law that introduced the ASSEP and SEPCAV vehicles to the Duchy in a bid to promote the country as an international pension fund centre.
The amendments, which the authorities say were made to optimise the existing legislation, include the fact that companies can now provide seed money at the inception of a fund to ensure diversified asset management from the off.
As new members join so an employer’s initial payment is gradually reduced.
Interestingly, the amendments also say that foreign companies with ‘social objects’ that are ‘similar’ to a Luxembourg pension fund can change their nationality in order to become a Luxembourg company and vice versa.
Furthermore, public reports now only have to be published on an annual basis only, instead of biannually.
Significantly, the Luxembourg authorities say they are also trying to improve fiscal transparency and the acceptance of the pension fund vehicles in other countries through exchanges of information.
To this end, for both ASSEP and SEPCAV arrangements, tax information has to be passed to the authorities on an obligatory basis by the end of the month following the closure of the social year
However, under the amendments custodians are given the added responsibility of checking that payments by contributors are made on time.
While to date only three pension funds have been granted approval under the 1999 law , more than half a dozen have been submitted for inspection and several more are in the planning, according to observers.
The Duchy will also see a proposal to reduce the annual subscription tax from 0.06 to 0.05% that investment funds pay on their net assets under management included in its draft budget for 2002 to go before parliament in September.
Jean-Jacques Picard of the Luxembourg investment fund association, ALFI, says they welcome the initiative and have been asking for the rate to be progressively reduced for some time.
Picard points out that whilst a one basis point looks small on paper, in reality, it could translate into a considerable sum, saving funds money and allowing them greater net returns. “It could be a nice little sum,” he says.
Though the proposal is to be discussed in parliament, Picard believes that it is as good as passed, since the draft has the full backing of the socialist party who make up the parliamentary majority. “There is practically no opposition to the proposed reduction.”
ALFI has more than 750 member funds and is Luxembourg’s main representative body for the country’s investment community.