EUROPE - The multiplication of tax-transparency funds within Europe is unnecessary, and the implementation of a pan-European vehicle would be the better option in terms of treaty network, according to Mn Services.

Responding to the recent news that the UK is planning to change secondary legislation to enable the launch of a 'tax-transparent fund' vehicle (TTF) by the middle of next year, Remco Van Eeuwijk, UK managing director at Mn Services, told IPE the UK might have trouble convincing other countries to recognise such a fund.

"The issue is not so much creating a tax-transparent fund structure but getting other countries to recognise its transparency," he said.

"Countries such as Ireland, Luxembourg and the Netherlands introduced this type of vehicle a long time ago and have therefore developed a large treaty network.

"After creating the fund structure, it is likely to take the UK government some time and effort before a UK fund can be launched."

Van Eeuwijk also said Dutch tax-transparent funds could be used to pool Dutch and UK pension fund assets in a tax-efficient manner, thereby enabling Dutch and UK pension funds to benefit from each other's scale.

He added: "The fact the UK government wants to change its legislation to implement this type of vehicle may be a bit late, as pensions already have the option to pool their assets in other European tax transparent funds. For example, the Dutch FGR was launched in the late 1960s and now benefits from an extensive treaty network.

"What, then, is the benefit for UK pension funds to use yet another tax-transparent fund? It would be ideal to have a European approach, which would be highly beneficial for pension funds, as it would be reduce complexity."

Van Eeuwijk said he understood the UK was seeking to exert more control over the features of such a fund. But he said he could not see how the introduction of TTFs would help the government to retain as much as £500bn of assets.

"The UK will be able to keep those assets under control only if the custodian is legally based in the country, which might not be the case," he said.

Van Eeuwijk also argued that a pan-European tax-transparent fund would help to improve consistency in the tax treatment of European pension funds within Europe.

"We have noticed that some countries in Europe do not recognise the tax status of pension funds in other European countries or differentiate between pension funds from different European countries," he said.

"In fact, non-EU countries often treat pension funds from different European countries more consistently than EU member states. That is a strange situation.

"A tax-transparent fund structure at the European level would therefore lead to more consistency."

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