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FTT to damage pensions even if exempted
06 May 2014
PensionsEurope chief executive voices his concerns about the FTT’s potential impact on European pension funds
European pension funds will be negatively impacted by the
proposed financial transaction tax (FTT) for 11 EU member
states even if they were given an exemption, according to Matti
Leppala, chief executive of PensionsEurope.
His comments followed the
recent decision by the European Court of Justice to dismiss
the UK's challenge against the FTT.
Pension funds are not exempted in the proposed tax, but this
could change as the FTT is a long way from being
"PensionsEurope is deeply concerned about the rationale behind
the FTT proposal. If the proposal will be applied in its
current form, pension funds will be badly affected by this tax.
"The consequent increase of costs will ultimately be borne by
the pension beneficiaries in terms of higher contributions or
reduced benefits. There is no cause to ask European pension
beneficiaries to pay for the crisis. They did not cause it, but
rather they have suffered (a lot) from it."
He said it is "extremely unfair" that pension funds are not
exempted since they "will be negatively affected even in the
case of finally being granted an exemption."
Transactions made by pension funds in the financial marke ts
would be directly taxed by the FTT.
Leppala said he expected sell-side and intermediate financial
institutions taxed by a future FTT would eventually pass the
cost onto customers such as pension funds.
"Pension funds, as institutional investors, are customers (buy
side) in the financial markets and we therefore fear that, as
it is the case with other taxes, the final customer will end up
paying for it. PensionsEurope invites the 11 participating
member states to dismiss the proposal. However, should the tax
be introduced, then pension funds and their asset should be
exempted from its application in order to reduce the burden for
He added that it was important to recognize difference between
pension funds and other financial institutions.
"Pension funds are not speculative investors. Pension funds are
long-term investors which focus their investments in the long
term in order to manage their long-standing liabilities.
"Pension funds did not require any support in terms of funding
from public finances during the crisis. They actually
contributed to water down the crisis by keeping their long-term
liabilities in the financial markets."