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CROSS-BORDER PENSIONS / PENSIONS MARKET IN IRELAND

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EUROFORUM. CROSS-BORDER PENSIONS / PENSIONS MARKET IN IRELAND. Anne Maher 16 November, 2005 Chief Executive Cologne The Pensions Board Ireland. Agenda. Cross-Border pensions Requirements Who might use them Influences Ireland Implementation of EU Pensions Directive - PowerPoint PPT Presentation
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CROSS-BORDER PENSIONS / CROSS-BORDER PENSIONS / PENSIONS MARKET IN IRELAND PENSIONS MARKET IN IRELAND Anne Maher 16 November, 2005 Chief Executive Cologne The Pensions Board Ireland EUROFORUM EUROFORUM
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Page 1: CROSS-BORDER PENSIONS / PENSIONS MARKET IN IRELAND

CROSS-BORDER PENSIONS / CROSS-BORDER PENSIONS / PENSIONS MARKET IN IRELANDPENSIONS MARKET IN IRELAND

Anne Maher 16 November, 2005Chief Executive CologneThe Pensions BoardIreland

EUROFORUMEUROFORUM

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AgendaAgenda Cross-Border pensions

• Requirements

• Who might use them

• Influences Ireland

Implementation of EU Pensions Directive Pension supervision As pensions location

Next Steps

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Cross-Border PensionsCross-Border Pensions

Member States must allow:• Undertakings in their territories to sponsor

IORPs located in other Member States

• IORPs in their territories to accept sponsorship from undertakings located in other Member States

which is ‘cross-border’ activity

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Cross-Border PensionsCross-Border PensionsRegulatory Requirements

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 in home country• “Fully funded” at all times• Prudential rules: home country of IORP• Social and labour laws: host country of beneficiaries

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Cross-Border PensionsCross-Border Pensions

Regulatory Requirements (continued) Each host state may prescribe additional

investment constraints relating to its “section” provided such constraints not greater than those imposed on local schemes in that state

Each host state may require information requirements as imposed on local schemes in that state

In practice may require ring fencing of each section’s assets

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Cross-Border PensionsCross-Border Pensions

Protocol

Agreement between supervisors to co-operate in supervising cross-border IORPS

Not yet agreed

Currently out for 2nd consultation period

Target is to get signed in February 2006

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Cross-Border PensionsCross-Border PensionsProtocol

Sets out Aims General principles Aspirations General matters (e.g. language)Covers Exchange of information Ongoing supervision Respective roles

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Cross-Border PensionsCross-Border Pensions

For Whom?

Single employer/single country scheme might consider relocation

Multinational employer might consider

• Pooling investments

• Pooling services

• Merging schemes in one location

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Cross-Border PensionsCross-Border PensionsReasons to relocate

Single employer/single country scheme Regulatory/supervisory regime?

Multinational employer Better governance/control

Single governance regime

Economies of scale/cost savings

Corporate change/culture

Accommodate mobile employees

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Cross-Border PensionsCross-Border Pensions

Influences on choice of location

Tax arrangements

Pension tradition/services available

Availability of tried and tested pension skills/resources

Regulatory/compliance regime

Ability to accommodate countries outside EU

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Ireland – Implementation of EU Ireland – Implementation of EU Pensions DirectivePensions Directive

Social Welfare and Pensions Act 2005 Statutory Regulations and Instruments

(September 2005) on:• investments• trustees• funding Standard• professional Guidance• preservation of benefits• disclosure of information• cross border

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Ireland – Implementation of EU Ireland – Implementation of EU Pensions DirectivePensions Directive

Social and Labour Law includes

• Preservation of benefits

• Pensions Ombudsman

• Disclosure of information and remittance of contributions

• No reduction in payable benefits because of Social Welfare pension increases

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Ireland – Pension SupervisionIreland – Pension Supervision

Supervisory Players in Pensions

The Pensions Board

The Financial Regulator

Revenue Commissioners

Pensions Ombudsman

Professionals (actuaries, auditors, administrators,

custodians, investment managers)

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Ireland – Pension SupervisionIreland – Pension SupervisionPrinciples of Pension Regulation

To maintain balance between necessary regulation and unnecessary cost

Voluntary nature of plans Trust-based system – role of trustees (but open to other

vehicles) Duty on trustees to comply Information disclosure Promotion of pension security Securing compliance without recourse to legal action

unless necessary

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Ireland – Pension SupervisionIreland – Pension Supervision

Regulatory Powers

Power to investigate

Power to prosecute

Power to remove trustees

Power to restore assets

Power to dispose of assets

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Ireland – Pension SupervisionIreland – Pension SupervisionRegulatory/Supervisory Activities

Scheme registration – schemes required to register with Pensions Board

Funding Standard – requirement to submit an Actuarial Funding Certificate (AFC) at specific times

Disclosure Compliance – conduct random audits of schemes

Ongoing discussions with relevant parties (e.g. trustees, advisers, providers)

Investigations – regular or arising from whistleblow reports

Prosecutions

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Ireland as Pensions LocationIreland as Pensions Location Tax arrangements

Irish law incorporates cross border tax reliefs

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

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Ireland as Pensions LocationIreland as Pensions Location

Pan-European Pensions Task Force

• Examining opportunities in international pensions area

Suite of asset pooling vehicles

• Unit Trust (Fixed Income Investments)

• Limited Partnership

• UCITS CCF (Equities Investments)

• Non-UCITS CCF (Alternative Investments)

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Ireland as Pensions LocationIreland as Pensions Location

Common Contractual Fund (CCF) Specialised transparent fund structure facilitating the

pooling of pension fund assets

Investors treated as if they own a proportion of underlying investments thus being considered the direct holder, while investments are co-mingled in larger pool. In this way Pension Fund benefits from a larger scale of operations while retaining all individual rights.

CCF can be set up as a single fund or as an umbrella fund with multiple sub funds

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Ireland as Pensions LocationIreland as Pensions Location

Common Contractual Fund (CCF)

Use of sub-funds allows investor to weigh investment in various funds to best match their profile

Available in UCITS structure facilitating cross border investment in Equities without additional penalties

Also available in non-UCITS format allowing wider variety of assets to be considered (Derivatives, Hedge Funds, Property)

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Ireland as Pensions LocationIreland as Pensions LocationAdvantages of using CCF

Facilitates investment in Equities Tax transparency – income treated as accruing to each

investor Allows for wider risk spreading No subscription tax or VAT generally applicable Exemption on tax from income and gains Investors benefit from home country tax treaty benefits as a

result of transparent status Single v’s Multi Manager Structures Legal Structure combined with Tax Transparency enable the

benefits of pension pooling to be achieved

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Ireland as Pensions LocationIreland as Pensions LocationWhy Ireland for Pooling

Ireland has available a suite of Pension Pooling investment vehicles, e.g. Unit Trusts, Common Contractual Funds (CCF) etc.

Experienced International Legal Firms Big Four Accountancy Firms providing tax advice 12.5% Corporation Tax Rate on all Trading Activities Prudent but Progressive Regulatory Environment for

Funds World-class Pool of Service Providers Significant investment in the infrastructure required to

service the pooling of assets Pension pooling already happening

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Next StepsNext Steps

Clarification of some Directive requirements Finalisation of Protocol between Member

State pension supervisors Consideration and decision on location by

pension scheme sponsors and those managing schemes

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In ConclusionIn Conclusion Pensions Directive

Is a first step Provides a framework for change Investment/asset pooling is 1st step Liability pooling – centralised administration are

next steps

Full Pan-European Pension Funds Will take time But WILL come about


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