In an editorial entitled ‘Luxembourg and Gibraltar: set to embrace Europe’s future’, the Portfolio International Offshore Advisers’ Handbook says that both jurisdictions are "manoeuvring into a position they hope will win them a big slice of Europe’s pan-European pensions market.
"While no EU financial centre, including London, plans to surrender its tax advantages quietly," the Handbook reports, "Gibraltar and Luxembourg are setting up pension laws that they hope will stand their financial service industries in good stead if and when Europe’s taxes are harmonised.
"The idea is that, as Europeans become more mobile and more sophisticated, demand will increase for pension products that are tax-friendly across the continent. Such demand will emerge first from multinational corporations seeking one pension policy for pan-European payroll, and then from private individuals."
In anticipation of this demand – and eventual EU regulation – Luxembourg has already passed international pension fund laws aimed at providing a flexible, tax-efficient structure for such products. "Similar moves are afoot in Gibraltar," the Handbook states.
The moves date back to 3 June 1999 when a colloquium was held at the Gibraltar Finance Centre conference room in Europort. The discussions were led by Robin Ellison of the Pan-European Pensions Association and centred on the prospect of launching Gibraltar as a base for a pan-European pensions system. On the Rock for the occasion were 17 representatives from major corporations including BT and Mars, institutional fund managers such as Citibank, Cazenove and Salomon Smith Barney, and consultants from William M Mercer and KPMG.
Mr Ellison pointed out at the time that when the initiative had been discussed at the conceptual stage several months previously, no other jurisdiction had been deemed to be "ideal". In this respect, he believed Gibraltar had the edge in that it has a "clean slate" on which to build a tailor-made system.
In attempting to create a framework for the ideal international pensions environment, Ellison believes Gibraltar is uniquely placed and highlights three important selling propositions: 1. English is the official language; 2. Gibraltar is within the EU; and 3. The Rock is a greenfield site in terms of legislation. On the downside, the legislation is not yet in place and the pensions infrastructure is insufficient, but Ellison is nevertheless convinced that Gibraltar will appeal to 'meganationals' wishing to base their pan-European pension schemes in one EU jurisdiction. "The key is to get the basic structure right," he said.
Since the explosion of initiatives in the mid-1990s from Ireland, Luxembourg and the UK on the pan-European pension fund vehicle issue, the evolution and implementation of these ideas have been less than forthcoming, not surprisingly because of the tax headaches. A number of countries were reluctant to take the proposal seriously while these tax issues prevented the existence of a true pan-European pension fund in the absence of a European directive.
In October 1999, John Mogg, director-general of the European Commission’s financial services division, announced that an EU directive paving the way for pan-European pension schemes could be introduced by 2002. The new determination to introduce pension reform comes ten years after the first serious attempt to facilitate cross-border pension schemes. A directive, liberalising investment practice, could facilitate cross-border investments, allow pension funds to choose the best managers, from whichever country, and protect pension holders by ensuring their contributions are properly invested. The directive is expected to be published in draft form in the first half of 2000.
However, experts are concerned that the Commission may seek to accommodate too many diverse views and increase rather than reduce the layers of complexity. News of the proposed directive also came as a consortium of multinational companies, headed by Kvaerner, prepared to launch a test case in the European courts, co-ordinated by investment consultants William Mercer (who participated in the Gibraltar colloquium in June), against a country that obstructs cross-border membership of occupational pension schemes.
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