The European pension directive paved the way for the brave new world of pan-European company pension schemes. But a recent report from consultancy Towers Perrin estimates that there are only around 50 such schemes in place today.
Though the directive was due to be adopted into national law in 2005, CFOs remain cool to the idea because not all EU member states allow tax deductions on pension contributions. However, the proponents of pan-European pensions are fighting increasingly successful battles to harmonise tax regimes.
The lawsuits began in 2003, when the European Court of Justice ruled that the Swedish government’s refusal to deduct tax for contributions paid to foreign units of financial services group Skandia ran against Article 49 of the EC Treaty, which allows for the freedom to provide services. Last June, in a case brought by the European Commission, the court ruled that the Belgian government was in similar breach of European law. The commission is pursuing related actions against France, Spain, Italy, Ireland, the UK and Portugal.
As the tax barriers fall, more companies are considering pan-European pension plans. In a survey of more than 300 companies late last year, Towers Perrin found that around a quarter of respondents are considering such schemes. This is a sharp change in attitudes, notes Paul Kelly, a senior consultant at Towers Perrin, given that there was “no interest at all” among CFOs only a few years ago.