EU to Revamp Rules on Private Pension Funds

European Union governments will allow private pension funds to operate across the 15-nation bloc, a first step in expanding the EU’s $2.3-trillion company pension market.

Finance ministers Tuesday will permit funds to branch out across national borders as long as they invest no more than 30% of their assets in hedge funds or derivatives and no more than 5% in a single security, EU officials said.

By pooling their European pension assets, companies from BT Group to Royal Dutch/Shell Group would each save $37 million a year, the EU estimates. Still, the move leaves untouched a patchwork of tax systems that will continue to hinder the pension fund industry.

“Anything that makes the world of pensions simpler is a good thing,” said Hannah Clarke, communications manager for Unilever’s $7.9-billion pension fund. “We have a lot of people who move around and not having a unified regulation makes their life more complicated.”

An aging population is straining Europe’s government-run retirement systems, the European Commission says. Over the next 15 years, the population aged 65 and over will rise 22%.

Tuesday’s meeting in Luxembourg will produce a “political agreement” on the outlines of the pension law. The rules require the approval of the European Parliament.