EUROPE -  The French pension provider UMR Corem is planning to launch a defined contribution (DC) cross-border vehicle, operating under Belgian law, by mid-2012.

Speaking to IPE, Charles Vaquier, chief executive of UMR Corem, said the pension fund is currently submitting a file in Brussels to launch an Organisation for the Financing of Pensions (OFP) fund and hopes the cross-border vehicle will be in operation from 1 July next year.

The move is one of the first significant EU cross border pensions structure under the 2003 IORP Directive. Some 84 pension funds have registered cross border activity under the terms of the legislation, but most of these are understood to cover pre-existing cross border membership between the UK and Ireland, which have long co-operated in occupational pensions.

It also represents a coup for the Belgian pension system, which has been trying for several years to attract significant EU cross-border pension activity. France, in contrast has not created an IORP compliant vehicle, which exposes second pillar schemes like UMR Corem to Solvency II.

"The OFP will therefore sign an agreement with UMR, which will enable us to transfer UMR employees' pensions falling under the second pillar to the OFP vehicle," Vacquier said.

UMR Corem is also seeking external business for the OFP fund and will initially focus on companies within the euro-zone, but might open its structure to non-euro firms within the European Union in the future, IPE was told. 

According to Vaquier, UMR has received three letters of intent coming from Portugal, one from an association of journalists, one from a small-cap company and the last one coming from a local authority.

The new OFP fund, which will be granted a capital of €3m, will be managed from Nantes - where UMR is based - for the time being.

Vaquier said: "We believe that with several European states opting out from the pension system, some major developments will be seen in the second pillar, especially in France, but also in Southern Europe. 

Vaquier also insisted that the cross-border vehicle would be operated as a defined contribution (DC) scheme, but would guarantee employees a certain payout at retirement that will be set by the fund rather than depending on investment returns, offering the advantage of a defined benefit (DB) pension plan. 

"Given the inflows of the OFP fund, UMR might increase its initial capital in the future", Vaquier finally concluded, "but this will depend on the new IORP directive and the potential capital requirements imposed under the Solvency II framework."

Last month, Anne-Marie Struycken-van Daelen, a partner at law firm De Brauw Blackstone Westbroek, said at the World Pension Summit in Amsterdam that European pension providers still face a number of barriers when implementing cross-border funds under the IORP Directive as they need to comply with social security and labour laws of both the home state and the host state.

 

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