GLOBAL - Multinational organisations are moving towards a more global approach over funding decisions, risk assessment and managing their retirement plans, a survey by Mercer says.
Mercer financial strategy group principal David Fogarty says: "Changes in national and international accounting standards mean that volatility in pension funding levels and costs have a greater impact on company financials, making retirement plan risk management much more important to companies.
"In addition, the tightening of national regulatory regimes means that costs are rising and plan fiduciaries - or regulators - are exerting greater pressure on the companies for monetary support to their pension scheme. Multinationals are reacting by applying more corporate resource to setting and managing pension policy."
The survey, which targeted 49 multinationals based in North America, Europe and Asia with total pension scheme assets of US$437.3bn, found governance remained a high priority driven by the desire to have a framework in place that mitigates financial risk and volatility.
The majority of respondents (62%) stated that senior management had identified retirement plans as a key corporate issue.
However, it added, a further 33% felt that while they were on the agenda, they did not get enough visibility and 10% of companies did not feel that retirement plans were on the agenda at all.
Across all regions, the percentage of respondents with a stated policy of only using defined contribution (DC) plans for new hires has almost doubled from 31% in 2004 to 61% in 2008.
Over half of respondents globally have closed their defined benefit (DB) plans to new members or to future accrual for existing members as well as introducing a DC plan.
In Europe, 80% of respondents have a global policy to provide benefits for new hires using DC plans contrasting with 42% amongst respondents in North America.
Mercer financial strategy group principal Adrian Hartshorn said: "Changing benefits is one lever that companies can use to reduce risk. Implementing global benefit design policies gives corporate headquarters more control over benefit design and this helps reduce pension risk and cost."
The Next Generation Pensions Committee is on a mission to promote and encourage younger voices in the industry. Kim Kaveh looks at its key objectives
This week's top stories included an analysis finding the cost of equalising guaranteed minimum pensions in schemes could hit FTSE 100 profits by up to £15bn.
Employers whose dividend to deficit recovery contribution (DRCs) ratios fall outside the "normal range" should expect to see higher regulatory scrutiny, although no fixed ratio will be set.
Investment consultants and fiduciary managers should expect a final decision on the investigation into the market to be published by the end of the year, the competition watchdog says.