PensionsEurope has warned that a financial transaction tax (FTT) will be damaging to pension funds, by increasing costs, lower returns and reducing the efficiency of investment strategies at pension funds.
The pan-European lobbying group for pension funds said that the FTT would be a tax on savings and retirement incomes but not financial services and would ultimately be paid for by pension fund members. It said that the proposed tax would hinder hedging activities by pension funds and companies and would increase the cost of capital for those in the FTT zone. This is because the FTT would make it more expensive for pension funds to implement hedging with OTC (over the counter) derivatives contracts, designed for risk and liability management. PensionsEurope added that pension funds often make short-term investments for cash flow reasons, or for tactical reasons or to control risks. PensionsEurope has called for the FTT to be withdrawn or at least for pension funds to be exempt from its scope.