| Over the past four years, an informal task force, which includes the International Fund Managers Association (IFMA) and a number of other City institutions and professionals, has been working on a mechanism to make London a more attractive centre for international pension fund management. The mechanism is a form of unit trust called a pension fund pooling scheme (PFPS), which enables the assets of pension funds from different jurisdictions (host countries) to be pooled so that they can then be invested in markets worldwide (market countries). The critical factor is tax. The PFPS must not be subject to tax itself, otherwise it will be less efficient than a direct investment from the host country to the market country. And it must be transparent so that market countries will allow taxes withheld by them to be repaid under double-tax treaties with host countries (and not with the UK, where the PFPS is located). In short, the PFPS must be tax-neutral, so that a host country's pension fund would be in an identical position if it had itself directly invested in its portion of the underlying securities in the market countries. |