At a time when the question of pan-European pension provision is on everyone's lips in the European retirement domain, transnational telecommunications group AT&T Unisource Communications Services has made a major breakthrough initiative in the field.
In a bid to satisfy the demands of a diverse and mobile European workforce, the company went back to the pensions drawing board to find a modern solution to a modern em-ployee benefit issue.
Jeroem Tomesen, a Dutch independent compensation and benefits consultant, who has overseen the project with the company, explains: The quest was to introduce a flexible pensions arrangement to cover employee movement around Europe within the group.
"For example , in Holland around a third of AT&T Unisource employees are not Dutch.
"We also wanted to reflect the current employment trend of shorter term periods within a single company.
"Consequently, we decided to re-ject the idea of nationalities and borders in an attempt to create a truly fresh initiative, whilst asking ourselves what the essential tenets of a modern scheme should be."
In essence, the new system, the fruition of these discussions, will allow employees within AT&T Uni-source who move abroad to work in one of the company's subsidiaries to retain their contributions within the currency and asset classes of their choice, despite the switch to a new scheme.
The core idea is that an employee will no longer have to transfer their pension rights each time they leave for another country, because the new system will incorporate the same investment funds, the same provider, one benefit statement and one payout at retirement.
Tomesen dubs the scheme an 'umbrella' style DC arrangement: "It gives the employee both the feeling of being part of a company pension plan whilst being 'non-geographical', in that country borders no longer matter in the building up of retirement assets, and employees can move their pension arrangements to a different country at will."
AT&T Unisource considered three investment managers after lengthy consultancy advice from Tomesen and Towers Perrin: Fortis in Holland and Swiss Life and Winterthur in Switzerland, seeking a provider of an investment vehicle capable of amalgamating this new benefits principle.
Fortis won the day, with Tomesen citing their enthusiasm for extensive investment in the scheme, as well as their European co-ordination and investment pooling capabilities as the deciding factors.
Job Schipper, vice president at Utrecht-based Fortis explains the principle benefits of such a system: "This really is the ideal employee benefits tool for multinationals with mobile employees, who if they previously moved around the continent were left with the two-fold dilemma of having to break up their accrued pensions rights into a number of separate entities. This meant they lost out on any continuity and investment muscle, whilst also having to knock on any number of doors to gain information on what pensions benefits they had built-up through their working lives."
The scheme, Schipper says, will begin operating in Spain, the UK, Holland and Switzerland, with its hub to be located in Holland.
Local insurance companies and fund managers will manage the pensions money in each country, with the selected providers being Banco Santander (with its South America asset management arm) in Spain, Pictet (La Suisse) in Switzerland and Royal & Sun Alliance in the UK - with Fortis handling Dutch operations.
The crux point of the plan is that employee pension contributions are paid into the employee's original domestic plan, irrespective of the country of employment - so a Dutch worker moving to Spain, for example, would still have payments in Dutch guilder going towards their retirement provision, despite receiving a salary in Pesetas.
"The beauty of the scheme is that it is so simple and fluid, because we are not imposing anything on the investment decisions of the local fund managers, just creating a pensions investment network which abolishes the chaos existing previously. We feel this is very much a pioneering step in pan-European pension provision and would not be so committed if we were not 100% certain of its success."
The second advantage of the scheme is the 'one stop shop' aspect inherent in a centralised plan, whereby AT&T Unisource employees will have access to every detail of their pension ar-rangement and investment via a single phone call or computer enquiry on a 24 hour basis.
Furthermore, the literature for schemes under the company umbrella is set to be around 90% the same for all employees, with only minor country discrepancies excepted.
Joe Tabbers at Fortis, says: "The point here is the centralisation of the system and how this benefits both employee and employer in terms of information and resources.
"It does away with the fragmentation which previously hampered transnational companies in their pension arrangements."
However, barriers to the implementation of such a plan presented themselves along the way. And questionmarks have been raised on issues such as currency discrepancies, tax factors and compatibility with local investment restrictions and rights.
Schipper concedes it would be easier if the UK and Switzerland were joining the euro next year: "We feel currency exchange for contributions between different countries is not a significant deal, but certainly with Holland and Spain in the euro this will facilitate the scheme, and there will be some minor discrepancies on the British and Swiss sides."
The greatest difficulty though, he says, has been to research and comply with different country cultures and regulations within the umbrella structure.
"In Spain, for example, we had to take into account the issue of trustees and Gestoras in deciding on suitable funds for employees, and in general we had to ensure we were building up a sole asset portfolio in each country to comply with existing domestic pension laws.
"Also it was essential that we had the correct foundations to enable the administration and reporting side to operate at an optimal level."
On the Dutch side, co-operation with the scheme has still to be ratified by the company's works council, although no hitches are expected to ensue when the scheme is voted on.
Tax wise, Schipper admits the plan is certainly not a fiscal panacea: "The scheme has to be tax neutral and both contributions and premiums will be subject to the tax laws of the domestic pension fund."
Nevertheless, the plan is to be very pro-active when it comes to the issue of employees wishing to shift their assets to a country plan of choice.
" We have looked at some of the problems arising in the US 401k system where workers have been bereft of knowledge on how to best direct their investments. As a result we have set up a training and advisory programme so that AT&T Unisource employees can make informed decisions on their retirement provision, because they will obviously wish to do so, particularly as the scheme is an accommodation for choice and mo-bility."
According to Tomesen, the plan is set to cover around 100 employees to begin with, progressing as issues of existing pensions rights for those employees in a branch of AT&T Uni-source where a scheme previously ex-isted are transferred to the new plan.
And extending the scheme to other countries is in the pipeline.
"We just want to have everything up and running in the first four countries before we begin to spread. But I believe Germany and Sweden could be next on the agenda," he says.
Tabbers at Fortis adds that the system will undoubtedly become a great competition bonus for AT&T Uni-source, enabling them to attract the required quality of personnel for such a progressive industry.
"In truth this is the first big step in the European pensions market in 40 years and with retirement issues gaining ever greater credence on the employment ladder, companies know they could lose staff to a system like this at a rival group.""
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