ANNE MAHER Chief Executive5 May 2004 The Pensions Board Ireland PENSION FUNDS IN IRELAND, FOR EUROPE

2. AGENDA  EU Influences on Pensions  Pan-European and Cross-Border Pensions  Ireland as home for Pan-European or Cross-Border pensions

3.  Pensions Directive  Tax Co-ordination  Joint Commission/Council Report on Adequate and Sustainable Pensions  Other Areas of Interest EU INFLUENCES

4. Pensions Directive  Came into force on 23 September 2003  EU Member states have 2 years to implement i.e. must implement by 23 September 2005  Key aims  ensure protection for pension plan members  liberalise investment environment for pension plans in EU  remove barriers to cross-border pension plans  Differentiates between national pension plans and cross-border plans  Provides legal framework for Pan-European pension plans EU INFLUENCES

5.  A sponsoring undertaking in one member state (host country) may set up an IORP in another member state (home country)  Separate legal entity  Meet information to members, funding, diversification and security of assets, freedom of investment requirements of Directive  Recognition by home country supervisor  Special conditions  authorisation of fund in home country  fully funded at all times  prudential rules: home country of fund  social and labour laws: host country of beneficiaries  information requirements: host country of beneficiaries  Each state may prescribe additional investment constraints relating to its “section” provided such constraints not greater than those imposed on local schemes in that state  In practice may require ring fencing of each section’s assets Pensions Directive Framework for Pan-European Pension Plans EU INFLUENCES

6. Tax Co-Ordination  European Court of Justice (ECJ) Cases (e.g. Wielockx, Safir, Danner, Skandia)  EU Communication of 19 April 2001  The elimination of tax obstacles to the cross-border provision of occupational pensions  Current moves to enforce  Commission referred Denmark to ECJ in July 2003  Infringement proceedings opened against Italy, Belgium, Spain, France and Portugal in February 2003  Infringement procedures also opened against UK and Ireland in July 2003 EU INFLUENCES

7. EU INFLUENCES  Co-ordination reports from all member states in 2002  Joint Report published in March 2003  EU-level analysis of national pension system and ability to face demographic ageing  11 agreed common EU pension objectives  Objectives relate to  Adequacy  Financial Sustainability  Responding to changing needs Joint Commission/Council Report on Adequate and Sustainable Pensions

8. Other Areas of Interest  Mobility and Portability  Equality  Atypical Workers EU INFLUENCES

9. PAN-EUROPEAN AND CROSS- BORDER PENSIONS Reasons for Employer Pension Scheme Relocation  Single Country Plan  Preferred regulatory regime  Administrative services  Multi Country Plan  Governance/Control Manager preferred providers Greater risk control/ALM Smaller number of plans  Cost Savings Influence investment strategy Fund managers pooling Tax efficiency Offset DB assets/surplus Service provider economies Centralised administration  Corporate Change/Culture M&A activity One company, one culture?

10. What Member States might offer  Funds Management  Funds Administration  Legal  Accounting  Actuarial  Investment Consulting  Benefits Administration PAN-EUROPEAN AND CROSS- BORDER PENSIONS

11. What is on offer already  Various scheme specific solutions to centralised asset pooling for pension funds  UK unit trust exempt from UK taxes  Luxembourg’s Fund Communs de Placement (FCP)  Ireland’s Common Contractual Fund (CCF) PAN-EUROPEAN AND CROSS- BORDER PENSIONS

12. Ireland’s Common Contractual Fund (CCF)  CCF enables multinationals to pool investments in a tax-efficient manner  Features of CCF  Contractual Structure Unilateral establishment by manager Custodian assumes fiduciary obligations  Common Ownership of assets = “Tenancy in Common”  No separate Legal Personality  Limitation of liability of Investors  Established under EU UCITs Directive  Regulated by Irish Financial Services Regulatory Authority (IFSRA) IRELAND AS HOME FOR PAN-EUROPEAN OR CROSS-BORDER PENSIONS

13. Irish Private Pension Model  Company pension plans  Personal pensions  Retirement Annuity Contracts (RACs)  Personal Retirement Savings Accounts (PRSAs) IRELAND AS HOME FOR PAN-EUROPEAN OR CROSS-BORDER PENSIONS

14. Some Features  2 types  Defined Benefit  Defined Contribution  Tax relief on employer and member contributions and on investments  Principles of Pension Regulation  balance between necessary regulation and unnecessary cost  trust based system – role of trustees is key  focuses on information disclosure  promotion of pensions security  securing compliance without recourse to legal proceeding unless necessary.  Wide range of competitive providers and products. IRELAND AS HOME FOR PAN-EUROPEAN OR CROSS-BORDER PENSIONS

15. What Ireland has to Offer  Established and relatively simple regulatory regime  Irish Financial Services Centre (IFSC)  Familiarity of Multinationals with doing business in Ireland  Established pool of service providers  Pensions experience  Structural flexibility IRELAND AS HOME FOR PAN-EUROPEAN OR CROSS-BORDER PENSIONS

16.  EU Pensions Directive needs to be properly implemented into national law of Member States  Protocols need to be agreed for cross-border supervision of pensions  Tax co-ordination needs to be enforced by EU Commission IN CONCLUSION

17.  It is a time of change for pensions and  It is a time of opportunity