BRUSSELS/UK- Mercer Human Resource Consulting has dismissed reports that Ecofin’s acceptance of the EU Pension Fund Directive will make it any easier to set up cross-border European pension funds.
France’s decision earlier this week to agree to fewer quantitative investment rules removed the last obstacle to reform but Mercers has questioned the proposed framework's effectiveness in allowing pension funds to operate across Europe.
European partner Mark Sullivan claims the benefits of the new framework are predominantly academic. "Multinationals will simply not bother with the hassle of extra regulation for very little gain," he says.
He suggests they can already achieve savings by centralising the management of individual country pension plans and that many already gain from the economies of cross-border investment management.
What is needed to add clout to the current framework is a breakthrough on tax harmonisation. “A legal case, brought through the European Court, looks like the quickest and most effective route to provide this," says Sullivan.
Mercers says that this is not addressed by the current initiatives, nor is there the appetite amongst member states to tackle the issues that need resolving to achieve this.
Nevertheless, it is believed that the lobby group PEPGO, the Pan European Pensions Group, is on the verge of launching a test case in the UK tackling tax discrimination on behalf of one of its multinational members.
Elsewhere the European Federation for Retirement Provision (EFRP) stands by its praise for Ecofin and for the Spanish presidency in pushing on with the legislation.
In a response to the announcement by Ecofin, it conceded that a true single market for occupational pensions will only come about following a more coordinated approach to tax. It said that the EC is working on the issue and that the process should speed up once the IORP directive is adopted.
Says secretary general of the EFRP Chris Verhaegen: “we should be very positive about this step as we know how difficult it was to get political agreement for this. It goes without saying that tax is the next hurdle we have to overcome.”
FEFSI, the European federation of investment managers, roundly praised Ecofin’s decision but also added that the Commission will need to implement the policies it announced in its April 2001 communication on the elimination of tax obstacles to cross-border pensions.