When IPE last spoke to Luxembourg’s consultants en masse, there was genuine excitement about the potential business associated with the newly-launched ASSEPS and SEPCAVS. As it happens the country’s two regulatory bodies have found it hard going and the progress has been slow and Unilever, KPMG and Alliance, the Dubai-based insurance company, remain the only three to capitalise on the legislation.
There remains cautious optimism though. Says Isabelle Adam at consultant Barnett Waddingham, “several companies are working on new projects. It’s a bit slow at the moment but it will start up pretty soon.” Adam says that the lack of any tax harmonisation has been a little disappointing. But nevertheless, this has not stopped companies from approaching consultants to get their thoughts on capitalising on the country’s new pensions vehicles.
What many of the consultants are offering is advice on launching, establishing and administering pension schemes. Adam confirms that many companies are planning to set up ASSEPs and SEPCAVs. “We’ve been approached by a companies so there is a market for pension funds.” Most of them have been banks who are eager to set up multi-employer funds.
Fernand Grulms who launched PECOMA, the pensions consulting group, says there have been slight delays due to co-ordination between the regulatory bodies the CSSF and IGSS. This is not a criticism though; “it’s new to them and they have to co-ordinate their activities,” he says. PECOMA had hoped to launch a pooled pension fund Luxpension earlier this year but it got delayed and Grulms hopes to get the go ahead this quarter.
Instead it has been advising about 40 companies on shifting book reserves to alternative schemes. They are also benefiting from the shift to DC and the increasing sophistication of investments and the increasing financial savviness of the average employee. “Investors are asking for a more sophisticated approach. In the past it was the employer who decided the investment policy, now it’s the employee that is making the choice,” he says.
James Ball at JBI, another local consultants, admits that progress in the number of ASSEPS and SEPCAVS has been relatively slow but that it is roughly in line with expectations. “There is a lot of interest but signing on the dotted line is another matter. The real boost for this will be when the directive is passed,” he says.
Instead there has been considerable work within the country for consultants. “What we have seen and what we did not expect is a lot of interest in the local market,” he says. More specifically this is firms setting up schemes from scratch or firms with internal book reserve schemes.
Ball says additionally there is considerable work on reciprocity agreements and JBI is dealing with a handful of enquiries on the subject. Luxembourg’s workforce include a number of expats and employees who commute from other countries. Since Luxembourg has a TEE scheme in contrast to the majority of EET schemes elsewhere in Europe, those workers are taxed twice over and hence the need for the agreements.
Ball is generous in his praise for competitors. “The people who are putting a lot of time and effort into this and who are thinking it through are Ebica.” The firm, launched by ABN Amro and headed by Philippe Leonard has worked on some interesting projects including launching a group insurance scheme for the Swiss subsidiary of a multinational.
Other projects include working with a German transfer agent to see if it could adapt its system to produce a pensions administration system. It has also worked with the continental European arm of a large US investment manager to find a pooling arrangement. In the pipeline and due for completion at the beginning of 2002 is a multiemployer pension fund for various Luxembourg banks.