EUROPE – Multinational companies in Europe “would welcome” the opportunity to have a single fund to finance their European Union-based pension obligations, according to a new survey by Hewitt Associates.
“A third of the respondents were found to have already considered a single pension fund while another third were 'looking into the idea',” Hewitt said, of a poll of attitudes about the pension fund directive.
“All but two of the 22 respondents have taken concrete steps towards establishing a preferred list of EU pension providers such as investment managers, actuaries and administrators.”
The directive will enable Institutions for Occupational Retirement Provision to operate on a cross-border basis. Multinational companies will be able consolidate all their EU pension assets and liabilities into a single pan-European IORP.
“The main advantage to pooling pension assets was thought to be more efficient plan governance, while discriminatory tax regulations and local resistance from employees, plan trustees (or equivalent) and governments top the list of perceived hindrances.”
Advantages included: better control of pension fund governance, savings on investment management fees, and easier implementation of corporate investment strategy. Disadvantages found were: national regulatory restrictions, tax rules and an unwillingness to consider the idea.
Seventy-three percent of respondents said a flexible regulatory environment was the most important factor.
“It is clear that borderless pension funds are already on many multinationals' agendas, as is the desire to regionalise their pension plan governance, providers and day-to-day management,” said Hewitt international pension consultant Tim Reay.
“For the multinationals surveyed, the UK is top of the list for most companies as the ideal location for pan-European management of their pension fund assets. However, as other EU countries devise attractive local regimes, this may change."