| Centralisation of pension assets: Two steps ahead of the Directive |
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| 09/10/2005 | |
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Only a handful of EU Member States have fully implemented the Pension Directive, but this has not prevented some multinational companies from pondering alternative routes to the pooling of their pension assets across Europe, or even globally. The Anglo-Dutch energy company Shell announced last month that it had started pooling the management of its €50bn worldwide pension assets in the Netherlands. A single asset management company has been created for this purpose, the Shell Asset Management Company (SAMCO), which operates out of Rijswijk in the Netherlands. The new company will manage 70% of Shell's pension assets internally. Middleman At this time, a legal pension structure is still necessary in each country where participants in the scheme are present. Once the directive is fully implemented throughout Europe, a pension fund will be able to engage in direct cross-border activities. That is, from its home base, to provide pension management services over all the European territory with only one agreement and directly to the contributor without passing through a local pension fund. With regard to Shell, all its worldwide pension assets will now be managed by SAMCO, but will remain the legal property of the local pension schemes which were previously responsible for a chunk of those global assets. In other words, each local scheme will completely outsource its asset management to SAMCO, while remaining a legal structure intermediating between SAMCO and the contributor. Tax transparency Other multinational companies have already taken the pooling route or have been reported to be considering it in the absence of the implementation of the Pension Directive. Ireland and Luxembourg, respectively through their tax-transparent Common Contractual Funds (for equities) and Unit Trust (for bonds), Sicav and FCP, allow for a degree of pension pooling to take place. Thanks to the tax-transparency of those vehicles, the assets of pension funds from various countries can be invested in a common fund, which its promoters say leads to economies of scale. However, as with Shell, the assets remain the property of the local pension schemes. Earlier this year, Suez-Tractebel, the Belgian energy group, pooled all the assets of its pension funds into a Luxembourg Sicav. Nestlé, the Swiss multinational has used pooled funds for €3.8bn of pension assets and has kept launching new pooled funds through 2005. Other multinationals that have been reported to be considering pension pooling include Unilever, whose European pension schemes have €15bn under management, and IBM, whose European schemes manage €16bn. Pooling is also a sensitive issue for the staff of many schemes: an internal row over the pooling of the assets even caused Walther Schapendonk, chief investment officer at Unilever's pension fund, to quit at the beginning of the year. Europe Until now, this "virtual" pooling of pension funds has run into difficulties due to uncertainty about the issue of tax harmonisation, which is not covered by the Pension Directive. Doubts over this issue have even caused IBM to delay its vehicle choice for pooling. Some Member States, notably Denmark, have been forwarded to the European Court of Justice following their refusal to implement tax transparency measures. In any case, the pooling trend seems to be firmly entrenched. Northern Trust reported that six multinational clients have committed around $4bn for pension pooling vehicles in Ireland and Luxembourg. The Chicago-based bank launched its first CCF-based pooled pension fund for a multinational corporate pension client in September. Earlier, another fund management behemoth, State Street, said it had received enquiries from multinational corporations, some with pension assets of up to €20bn, about setting up pension pooling. J.L. |
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Articles of the same Topic : Pension funds Western Europe
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