Tax Transparent Vehicles in the UK to Attract $31 Billion for Pensions

(December 8, 2010) — A new transparent tax vehicle is expected to attract more than $31 billion in additional multinational pension fund investments, according to Deloitte.

“Over the past ten years Deloitte has worked closely with multinational companies and investment management groups in establishing tax transparent investment vehicles,” said Gavin Bullock, a Deloitte partner, in a statement. “For multinationals these have resulted in material economies of scale and improved governance for their international pension funds. In addition, leading investment managers have gained a competitive edge by taking advantage of the tax efficiencies that these vehicles can offer,” he said, adding that the increase of tax transparent vehicles in the UK will significantly increase the competitiveness of the financial services sector.

Late last month, Financial Secretary to the Treasury Mark Hoban announced the government would be launching a consultation on how best to implement the UCITS IV directive before the end of the year. He said the proposed tax transparent fund vehicle, which allows beneficial double tax treaties between investors and investments to be accessed, is set to be launched ahead of the implementation of UCITS IV regulations.

UCITS IV includes a number of measures designed to improve the efficiency of European funds, and the formation of tax transparent investment vehicles has resulted in improved governance for international pension funds, Bullock told aiCIO. “This is a great opportunity for the UK to enable UK companies and fund managers to increase their competitive performance and to encourage those providers considering setting up a tax transparent vehicle to look again at the UK, especially in response to regulatory changes such as those under UCITS IV.”

“The UCITS IV regulatory changes will allow investment managers to rationalize their fund ranges by establishing master-feeder structures which would tend to include a tax transparent vehicle,” Bullock told aiCIO. “These should help drive down costs and improve tax efficiency which will improve the overall competitiveness of the investment managers.”