UK - Large multi-national pension schemes are frantically putting measures in place to avoid being burdened with a requirement for full funding under new cross-border regulations, according to Peter Blake, principal at Mercer Human Resource Consulting.
Under the Pensions Act 2004, effective 30 December 2005, a DB pension scheme located in one EU member state needs to apply for authorisation and approval to accept contributions from employers which employ members in other member states.
It is understood schemes have until 29 March 2006 to file their applications for cross-border status, where they will then have until 22 September 2008 to get the plan up to fully funded status.
According to Blake, nearly all of his clients, mainly large multi-nationals, are “frantically” putting in place arrangements that meant they did not have to apply for cross-border status.
“I think most of our clients will be ready in time but it does restrict the ability for multi-national companies to operate their pensions cross-border,” he said. “There is a panic because of the short deadline, companies are franticly making sure they are removed from plans.”
With such stringent regulations on funding levels Blake believed anyone wanting to operate a cross-border plan was going to have to go down the DC route - especially UK companies who would otherwise struggle to make the 2008 funding deadline.
“In the Netherlands for example, local legislation requires full funding at all times but plans are typically funded at a much lower level than in the UK. It is a much less onerous requirement for them,” Blake concluded.
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