Towards Pan-European Occupational Pension Funds 

During this summer, the European Commission has issued a green paper to launch a debate on pension systems within the EU. Achieving an adequate and sustainable retirement income now and in the future in an aging Europe is a major challenge. Next to the public pension systems, the first pillar, there is a growing need for private occupational and individual pension schemes, the second and third pillars. The EU Directive on Institutions for Occupational Retirement Provisions (the IORP directive) established a European passport for second pillar pension vehicles, allowing them to offer cross-border services.

In Luxembourg, several regulated pension funds have been designed for use both in the Luxembourg domestic market and the international market:

  • The SEPCAV (société d’épargne-pension à capital variable) is comparable to an investment fund of the SICAV type and is only appropriate for defined contribution (DC) plans ;
  • The ASSEP (association d’épargne-pension) is suitable for defined contribution (DC) and defined benefit (DB) plans and can accommodate both type of plans in a single legal structure by adopting a multiple compartment structure. An ASSEP can also fund death benefits for which appropriate reserves need to be recorded.


These two vehicles are regulated by the CSSF under the law of July 13, 2005 implementing the IORP directive. The third option for a pension fund lies within the framework of the insurance legislation of August 31, 2000. The Commissariat aux Assurances pension funds are suitable for DC and DB schemes and supplemental benefits in case of death or disability. Alternative solutions for starting on a smaller scale are the pension pooling vehicle, the group insurance contract and the pension trust. Asset pooling vehicles are structured and operate like investment funds.

As at December 31, 2009, there were 15 pension funds regulated by the CSSF for total assets under management of EUR 654 million compared to EUR 286 million as at December 31, 2008. Following several years of stagnation, 2 ASSEP obtained the CSSF agreement in 2009 for use in the Luxembourg domestic market. There are 4 pension funds regulated by the CAA. These figures are the results of legal and cultural barriers in the development of the pan-European pension funds.

The main barriers to cross-border activities lie in the obligation for pension funds to comply with social and labour laws applicable in each Member States in which the scheme is offered. Enhancing transparency about national regulatory requirements and achieving minimal harmonization would facilitate cross-border activities and the portability of pension rights.

The tax regime for Luxembourg pension funds is designed to be as tax neutral as possible. The tax treatment of employers’ contributions and benefits will generally be determined by the country in which the employer, employee or pensioner are located. A major obstacle for mobility lies with tax discrimination which may occur at different level.

The pension reforms across Europe and the financial and economic crisis have illustrated the increased importance that will take the complementary pensions. A key priority should be to develop pan-European pension plans allowing portable pension plans and reduction of costs. As the 2nd largest Fund centre in the world, Luxembourg has the legal framework and the financial expertise to be a prime location for the establishment of pan-European pension schemes.