Multi-national companies must consider complex methods for scheme funding including increased flexibility on retirement benefits, Aon says.
In a research paper published today (28 May), the consultancy firm said companies worldwide would continue to be challenged specifically with reducing cash outflow. This is complicated by every country being at a different regulatory stage of coping with the Covid-19 pandemic and the associated economic turmoil.
As well as looking to cut different categories of cost, Aon found a number of employers across a variety of sectors are starting to look for savings in longer-term employee benefits, for example, global retirement plans.
Senior partner of retirement solutions Paul Bonser said chief financial officers would be "forced to look at measure which they would not normally countenance".
"For most multi-national companies, pensions represent the biggest component of their employee benefits expenditure. There is global recession looming - along with the sudden impact of the crisis that companies are facing," he said.
Aon's research showed significant flexibility in many countries to adjust contributions to defined contribution (DC) plans and adjust the funding of defined benefit (DB) plans, matching similar flexibilities announced throughout April and May by The Pensions Regulator.
Some countries have already relaxed regulations almost entirely, while others will introduce more flexibility over the coming months, Aon said. Despite long-term consequences, the consultancy determined that reducing contributions paid into global retirement plans could mitigate short-term risks and add protection for companies and their employees over the next few months.
Bonser added: "It's the companies with good governance structures in place and clear data in their global DB and DC plans that are well-placed to take quick and decisive action which could offer them additional cashflow and cost savings at a crucial time.
"Whether a company actually decides to use the retirement plan savings lever is another matter, but the option can be there; it's very clear that maintain cashflow is dominating the thinking of CFOs and that they are therefore looking at their global retirement plans and flexibilities these could present."
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