GLOBAL -The burden of coping with globally mobile employees' pension benefits for multinational employers would be eased with the introduction of pan-european pensions according to Mercer's Peter Blake (pictured).
IN the Expatriate and Third Country Nationals Benefits Survey, it was discovered that as the number of short-term international assignments surged by 60%, one in four multinationals still do not have a benefits policy for globally mobile employees and almost a third have no governance procedures.
In an interview with Global Pensions, Blake said: “Dealing with pensions for expatriates has always been a sticky subject. Moving from the home country to the host country and back again is breaking down because you have far more globally mobile employees moving in different locations. It is difficult to deal with.”
“If a company can have a pan-european pension plan to facilitate movement within the European Union for example. It makes the whole ball game much easier.”
However Blake believed the first pan-European pension scheme is a long way in the offing, predicting a two-three year wait despite the fact the EU pensions directive was set up in September 2005. Blake added that it was likely many countries would take up feasibility studies within 12 to 24 months.
“There’s not just legislative issues to deal with there’s also administration to cope with and we suspect very few companies at this stage are going to be able to operate a cross border pension scheme,” Blake added.
IN an attempt to resolve the issue just over a fifth of companies surveyed have set up plans specifically for their globally mobile employees. With a tendency to be offshore they allow an employee to hold onto their pension while maintaining global mobility.
However Blake warned that many companies are trying to make existing home country pension plans work for as “long as possible”.
He said: “If employees lose their link to a specific country it gets quite messy. There are issues of tax, people not retiring to the home country, currency issues and also the problem of social security payments.”
Blake also said the first step in terms of getting global efficiencies with respect to pension plans would be the take up of common contractual funds (CCFs) that allow for the cross-border pooling of assets.
“Having a common asset framework is the precursor to having a pan-European pension plan.” he asserted. Already some large household names have shown interest in CCFs but many have yet to make firm moves.
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