General Electric’s pan-European pension fund move to Belgium approved
General Electric (GE) in September 2016 has had its European pension fund approved by FSMA, Belgium’s financial supervisory authority and the regulatory body for pension funds. GE is encouraging its existing European-based pension plans to join the fund, which takes the legal form of an Organisme de Financement de Pensions (OFP), Belgium’s IORP-compliant vehicle for pensions provisions. At this early stage, a management committee has been appointed.
An IORP or Occupational Retirement Provision is a pension fund in EU slang. The IORP Directive, adopted in 2003, is the European prudential framework for IORPs or pension funds. A new version of the Directive, IORP II, is under discussion since early 2014.
Belgium is poised to establishing itself as a host for cross-border IORPs and the Finance Ministry is expected to announce further measures in the coming weeks that will attract more pension funds to the country. This after BP is slated to move its Dutch pension fund to Belgium this year, following the lead of the company’s Irish, Spanish, and Swiss pension funds. ExxonMobil is also interested in shifting its pension plans to Belgium. The Belgian regulator said that several billion Euros worth of Dutch pension assets could be transferred to Belgium-based IORPs over the next year if companies in the Netherlands follow through with their current plans.
Despite European integration and harmonization, intra-EU regulatory competition is alive and well even as large multinational employers are consolidating some of their existing plans in multiple EU jurisdictions into one single pan-European plan. The location of that plan has no impact on taxes applicable to employers and employees. Therefore, differentiation comes from regulations and costs.
Nuances in regulations have a bearing on the flexibility in allowable investments; the administrative efficiency (or lack thereof) of regulators determines the speed at which the pension fund can be implemented initially and later augmented with new subsidiaries. The presence of large TPAs and of global asset management firms is critical in achieving economies of scale, which is the main point of most consolidations in the first place.
Belgium’s apparent success in attracting Dutch pension plans in spite of a decidedly unattractive income tax regime seems to come from a combination of an aggressive regulator bent on attracting business to their country; comparatively broad definitions of possible investments; a good ecosystem of third-party administrators of plan participants and of assets; and last but not least, a common language, Dutch.