Barriers hampering development of cross-border pensions, experts say
EUROPE - European pension providers still face a number of barriers when implementing cross-border funds, limiting the expansion of such vehicles, but new initiatives are expected in the near future, according to experts.
Speaking at the World Pension Summit in Amsterdam, Anne-Marie Struycken-van Daelen, a partner at law firm De Brauw Blackstone Westbroek, noted that, at the end of July, only 84 European pension funds had launched cross-border funds due to a number of barriers.
"One of the main issues for pension providers is to comply with social security and labour laws of both the home state and the host state," she said.
"In addition, member states' views differ on cross-border activity, especially regarding the valuation and the technical provisions, as well as the investment requirements."
The ongoing financial crisis is also hurting the development of cross-border activity, as pension funds focus more on funding shortfalls than on the marketing of their funds abroad, Struycken-van Daelen said.
However, some pension providers in the Netherlands are seeking to launch new initiatives for defined benefit (DB) plans, having only implemented defined contributions (DC) schemes so far.
In September, Insurer Aegon announced plans to launch a Premium Pension Institution (PPI) - a cross-border DC pension vehicle - in the fourth quarter.
The PPI can take the legal form of a public limited company, a private limited company, a foundation or a European company (SE) and is financed on the basis of capital funding - meaning that pay-as-you-go pension schemes cannot be operated by a PPI - with its registered office in the Netherlands.
The main advantage of a PPI is the fact many requirements of Dutch supervisory legislation do not need to be met.
Therefore, the vehicle is not obliged to fulfil a number of prudential rules - supervised by the Dutch Central Bank - that are applicable to a common Dutch pension fund, such as maintaining technical provisions or meeting solvency requirements.