EU to block free flow of pension fund assets

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BRUSSELS (Reuter)-The European Commission is to withdraw a proposal for the free investment and management of pension funds, a Commission spokeswoman said.

The long-expected move is a setback for British pension fund managers. If the proposal had gone through it would have widened their opportunities in other European countries. The proposal was tabled nearly three years ago, but there has been deadlock among member countries over how to implement it.

Raniero Vanni d'Archirafi, financial services commissioner, will tell ministers that the Commission is likely to withdraw the directive and follow other courses of action, the Commission said.

Plans to open up the pension fund market were only clearly supported by Britain, Ireland and the Netherlands where about 80 per cent of the total fund assets of ecu1,000bn ( pounds 770bn) are located.

The Commission, backed by these three, argued that at least 60 per cent of pension fund assets must be invested in the currencies in which pensions are to be paid, leaving substantial amounts available to be invested across borders. Other countries feared losing control of their pension fund investments and opted for a much stricter regime of at least 80 per cent of assets.

The original move was made because restrictions on investing pension fund assets violate EU rules providing for the free movement of capital.

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