UK Chancellor Calls For Opening Up Of EU Pensions Investment

by Jason Gorringe, Tax-News.com, London

12 March 2003

Gordon Brown, UK Chancellor of the Exchequer called on Monday for the removal of European cross-border barriers to the diversification of investments in pension funds management. His call comes as the European Parliament is set to approve the EU's Occupational Pensions Directive this week. If the EP votes in favour, the Directive will become part of EU law in 2005.

"While America has achieved a high degree of diversification across state borders, investment in Europe remains fragmented on national lines," said Gordon Brown at the Centre for European Reform in London. "There is (now) a need to remove barriers to diversification of investments across borders."

The Chancellor also indicated UK support for the European Financial Services Action Plan. This would improve mutual recognition of financial services providers in insurance, banking and capital markets. But he warned that the UK would challenge European Union regulation if it felt it hindered competition.

"And where EU regulation such as the proposed new Investment Services Directive threatens to weaken rather than strengthen competition we will fight to change it," Brown said. The directive, seen as a cornerstone of the FSAP, seeks to promote a "single passport" for investment firms, investor protection and a regulatory framework for investor transactions.

Brown reaffirmed UK opposition to tax harmonisation: "The way forward is mutual recognition of national practises not harmonised regulations; and tax competition not tax harmonisation." He called for an end to "old protectionism" and the embracing of open markets. But Austrian MEP Othmar Karas, Rapporteur for the Pensions Directive, said that its approval would mean that harmonised fiscal treatment of supplementary cross-border pensions is set to "come closer".

The Directive's chances of success were enhanced last October when the European Court of Justice held that payments made voluntarily into a pension scheme in another member state should be allowed to benefit from tax breaks available in the state where the pension scheme operates. "Governments should not be restricting or disallowing tax deductions applying to contributions to voluntary pension schemes paid to pension providers in other member states", said the Court.

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