European Union Pensions Directive: One Year On Anne Maher Chief Executive The Pensions Board 1 November 2006

2 Agenda  Background  Progress  What is now possible?  How is this likely to develop?  Where will these plans locate?  Next steps 2

3 Background Legal  EU aim to achieve Single Market for pensions  EU Communication on “The Elimination of tax obstacles to cross-border provision of occupational pensions” (April 2001)  EU Directive 2003/41/EC on “the activities and supervision of Institutions for Occupational Retirement Provision” known as the “Pensions Directive” (September 2003)  The Pensions Directive to be implemented into Member State legislation by 23 September

4 Background EU Pensions Directive Principles  Sets framework for pension scheme supervision  Effectively sets common minimum level of supervision  Moves towards freedom of investment for pension schemes  Facilitates cross-border pension schemes  Provides possible legal framework for Pan European pension schemes 4

5 Progress  Slow implementation by Member States 20 with full notification 2 with partial notification 3 with no notification EU Commission taking legal action to enforce  Tax infringements in 18 Member States Dividend and/or interest taxation EU Commission pursuing in European Court  Committee of European Insurance and Pension Supervisors (CEIOPS) supervising implementation  Budapest Protocol agreed between pension supervisors 5

6 What is Now Possible  Investment pooling cross-border - already possible and happening  Pooling of liabilities  Pooling of administration 6

7 Development of Cross-Border Business Types of Cross-Border IORPs  Existing plans which relocate  New employer sponsored cross-border plans  New commercial cross-border arrangements 7

8 Development of Cross-Border Business Who is Interested  Multinational Employers  For pooling or merging  Employers with Existing Pension Plans  For regulatory or financial advantage  Commercial IORPs Providers  Looking to sell pensions cross-border 8

9 Development of Cross-Border Business Reasons to relocate  Multinational employer  Better governance/control  Single governance regime  Economies of scale/cost savings  Facilitate corporate change/culture  Accommodate mobile employees  Single employer/single country plan  Regulatory/supervisory regime?  Financial advantage? 9

10 Development of Cross-Border Business Drivers  Commercial Beneficiaries  For-profit IORPs providers  Advisers to multinationals  Potential providers of cross-border management and administration services 10

11 Development of Cross-Border Business Influence on Choice of Location  Tax arrangements  Investment opportunities  Pension tradition/services available  Availability of tried and tested pension skills/resources  Regulatory/compliance structures and environment  Ability to accommodate countries outside EU 11

12 Development of Cross-Border Business Obstacles  Social and Labour Law  Tax  Defined Benefit Funding Standards  Pension Reform  Member State attitude  Inexperience  First mover disadvantage 12

13 Location of Cross-Border Business  Any Member State  Attraction of Luxembourg, Ireland, UK, Dutch pooling vehicles?  Belgium 13

14 Location of Cross-Border Business 14 Ireland  Tax arrangements Irish law incorporates cross-border tax reliefs  Investment opportunities Common Contractual Fund (CCF)  Pension tradition/services available Ireland has long established private pension structure  Availability of tried and tested pension skills/resources Investment, Actuarial, Accounting, Legal, Benefit consulting, Benefit administration, Compliance skills available in Ireland  Regulatory/compliance regime Acceptable and balanced regulation by open and accessible regulators supervisors in Ireland  Ability to accommodate countries outside EU Global services available in Ireland

15 Location of Cross-Border Business Ireland  Pan-European Pensions Task Force  Examining opportunities in international pensions area  Will facilitate initiatives/changes  Suite of asset pooling vehicles  Unit Trust (Fixed Income Investments)  Limited Partnership  UCITS CCF (Equities Investments)  Non-UCITS CCF (Alternative Investments) 15

16 Next Steps  Implementation of Directive by all EU Member States  Resolution of tax issues  Clarification of some Directive requirements  Protocol in operation between Member State pension supervisors  Consideration and decision on location by pension scheme sponsors and commercial providers 16

17 In Conclusion  Pensions Directive  Is first step in single market for pensions  Provides a framework for change  Investment/asset pooling is happening  Liability pooling and centralised administration are next steps  Full Pan-European Pension Funds  Will take time  But WILL come about 17