The plan of Fondaereo, the Italian pension scheme for pilots and flight attendants, to set up a cross-border scheme project could pave the way for further cross-border pension solutions, according to Francesco Briganti, secretary general of the Cross Border Benefits Alliance (CBBA).
The European Union’s rules for cross-border institutions for occupational retirement provision (IORPs) so far have represented an obstacle for multinational corporations looking to offer cross-border pension provision to its employees, and for the labour organisations supporting these initiatives, said Briganti.
This is shown by EIOPA’s advice to the European Commission on the revision of the IORP II Directive, according to him.
Fondaereo has taken a “brave” decision, testifying that the appetite for cross-border pension funds is there, Briganti added.
The Italian scheme has recently conducted an analysis, identifying Ireland as a host country for a cross-border scheme. This is in contrast to a trend towards creating cross-border IORPs that has come to a standstill lately.
Those that set up a scheme are finding it hard to manage it, and those who tried to establish new schemes are “discouraged” by the regulatory framework, Briganti said.
The IORP II directive has “complicated the regulatory landscape” because it has given vast freedom of decision to member states on certain matters, he added.
EU member states have a certain freedom to interpret the IORP II directive, for example on the establishment of the majority of members and beneficiaries necessary to transfer schemes at a cross-border level.
“Some of the member states have used such freedom to discourage, if not really boycott cross-border initiatives in their own jurisdictions,” Briganti continued.
Aon withdrew its United Pensions solution from the Dutch market, while the Amundi pension fund, created in Luxembourg, was closed, and Sanofi has lamented over complex bureaucratic, tax, and regulatory frameworks for its cross-border scheme.
While in the past, some pension providers decided to stop or reduce their cross-border initiatives due to obstacles, there are others that have conducted feasibility studies, concluding that it is better not to proceed with the existing legal framework, and to maintain a ‘wait and see’ position, Briganti said.
Fondareo’s project, if successful, could encourage other players, creating a domino effect to start cross-border IORPs, supported by EU institutions.
“The European Union is now well aware that it is necessary to ease cross-border activities of pension funds,” he stated.
EIOPA’s advice on the review of IORP II takes note that cross-border activities are not taking off, recommending changes.
Fondaereo has selected Ireland as a host country to set up a cross-border scheme, a reasonable choice given the fact that in Ireland there are employees working in the aircraft industry that are mobile.
“Fondaereo might then target other countries with mobile employees in a similar situation to expand its cross-border activities,” Briganti added.
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