EUROPE - Northern Trust has rolled out a new service aimed at multinationals seeking to evaluate the tax implications of pooling the investments of their various international pension funds.
The service, which Northern Trust claims is the first of its kind on the market, can compare the existing tax position of a subsidiary’s pensions plan against investment in a pooled vehicle. Northern Trust says the system is flexible in that it can look at any combination of asset classes, asset allocation strategies and different income yields. The service can also work for any number of pension plans.
Lucille Knappe, vice president and head of European business development at Northern Trust says: “Local tax laws and the circumstances of the plan will heavily influence the type of vehicle selected, and ultimately what you can gain through pooling.
“Tax advantages that can be gained through pooling are attractive, however, the tax consequences of investing in the pool need to be understood in detail.
“The tax will be different depending on each country plan’s individual situation, where they’re starting from, the asset classes in which they invest, and their asset allocation. And calculating the tax effect of investing in a pool for each country plan is key to persuading them that this really is a good idea,” explains Knappe.
“If you calculate this plan by plan, then a company can see the potential tax effect using any one type of corporate vehicle structure. Depending on how the local plan currently invests this can be a positive or negative number, so you have to look at this quite closely. “
Northern Trust says that a number of multinationals are already using the service.
Northern Trust has over 1.44 trillion dollars in assets under custody and more than 293 billion dollars in assets under management.