LIECHTENSTEIN - The law to bring Liechtenstein's second-pillar pension funds in line with the European occupational pension funds directive goes into its second and third reading in the next weeks.

No objections had been made by parliament during the first reading in September leaving the government optimistic that it will come into effect on 1 January 2007 as planned.

Liechtenstein, not a EU-member state but a member of the European Economic Area, "wants to position itself as attractive domicile for institutions in the second pillar system", the government said in a statement on the bill.

"There is a good chance for Liechtenstein to position itself as attractive domicile for cross-border pension funds and thus to profit from this huge market potential," the country's financial supervisory authority quoted a study on Liechtenstein as pension fund domicile presented last December.

The study ordered by the government from the University of St. Gallen names various advantages Liechtenstein has.

These are: "Good reputation, the respectability and the tradition of its financial centre, the existing infrastructure, the presence of various domestic an foreign financial institutions, the existing know-how in the field of financial services, stability of the law, a respectable but flexible financial supervision".

Under the new law it will be possible for non-compulsory second pillar pension funds in Liechtenstein to offer their products in other EEA countries or to run funds there.