EUROPE/NORTH AMERICA – Defined benefit pension provision for expatriates from European and North American companies has nearly halved in the last 10 years and European firms are more likely to offer a defined contribution alternative, according to a survey just published by consultancy firm, William M Mercer.

The survey, the annual Mercer Retirement and Benefits Survey for Third-Country Nationals, looked at the way 133 European and North American companies approach the question of benefits and pension provision for their overseas workers. The companies surveyed have over 27,500 expatriate workers between them.

The survey finds that in 1991, 79% of participant companies offered overseas employees a DB scheme, but in 2001 that figure had fallen to 42%.

Paul Kelly, a worldwide partner at Mercers in London, says that shifting to DC plans is one solution. “The results of the survey show the shift from DB schemes has already had a major impact on expatriate workers. Expatriates can be a big expense on the company. Moving to DC is one way of controlling costs.”

Mercers research finds that European companies are more likely to have a DC scheme in place for their overseas employees, something Mercer says is surprising. According to the survey, 73% of the European participants compared with 41% of their North American counterparts have DC plans set up for expatriates.

However, the survey points out that retirement plans cost sponsoring employers more in Europe, where the median fixed employer contribution rate is 12% as opposed to North America’s 5%.
Comments Kelly: “Employer contribution rates tend to be higher in Europe than North America as pensions represent a larger portion of the total remuneration package in this part of the world.”

Overall the survey finds that almost half those surveyed offer some form of retirement provision. Many offer special expatriate plans for longer term overseas placements, mainly because of the tax and legal problems associated with keeping these employees in existing company schemes.