I am pleased to see Calum Kapoor and Mary McDougall working together on an article that looks at the taxation of overseas money invested in American assets. You can read it on a “free share” here.
I profess to be unaware of some of the nuances of the concerns but that two pension stalwarts are writing this article, suggests that the transfer of money that was in DB pensions across the pond to American private equity firms (fronted by UK insurers) is a dangerous practice.
The US Treasury may have moved to reassure some of the country’s biggest foreign investors over a shake-up of tax rules after top sovereign wealth funds warned they could cut their exposure to America if it pressed ahead.
That’s fine if we still had the chance to choose where our pension fund money is invested, but many pensioners have no representation by trustees and only an insurance company to look to for their pension investments.
Under Section 892 of the US tax code, foreign governments and their controlled entities — a category that includes SWFs and some public pension funds — do not pay US tax on what the IRS categorises as investment activity. The Treasury said in response that it was “considering all options” for the proposed regulations, which it had issued “due to requests for certainty from the industry”, the spokesperson added.
I cannot think of any western country that I would trust on tax (including tariffs) than America.
It is time that we thought seriously about the impact of American companies owning British insurance companies and investing money for British companies in America. I will finish how Calum and Mary finish
The proposed regulations come after Section 899 in last year’s “big beautiful bill” threatened to increase taxes on dividends and interest on US stocks and some corporate bonds for foreign investors.
Babak Nikravesh, a partner at law firm Greenberg Traurig who advises a number of sovereign wealth funds, told the FT his clients had been “really concerned” about how hospitable the US would remain and would “have a hard think” when it comes to deploying new cash.
We have the PRA, the BOE and ultimately His Majesty’s Treasury looking out for the safety of those in insurance arrangements. This includes those in retail and bulk annuities.
I hope that the Government’s financial organisations are considering our “wealth” whether “sovereign” or “insured“.
There are enough self inflicted wounds ready to precipitate a correction in an overpriced US market, now another one for the list, taxation.?
Which one will be the tipping point?
I thought that failures in private credit would suck in new money from retail investors (or other suckers ) facilitating “in the know” redemptions
Without a lender of last resort, semi-liquid funds rely entirely on the assumption that redemptions will remain orderly. If retail panic hits, the structure has no way to satisfy the “redeemable claims” it promised without destroying the value of the underlying assets.
Unfortunately this is something I have been warning about for a number of years. In my opinion its not a matter is this a risk that might happen, more when will the US PE ownership of UK bulk annuity providers find their underlying investments have been overvalued and cause a cascade of pension defaults. May take a decade or longer, but maybe just round the corner. PRA need to have a handle on this and ready to deal with the consequences of partial defaults.