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Multinationals warming to DC and cross-border pension plans

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  • Multinationals warming to DC and cross-border pension plans

EUROPE - New governance requirements and de-risking pressures have led a growing number of multinationals to redesign their pension schemes and increasingly consider defined contribution (DC) and cross-border plans.

According to a survey by Aegon Global Pensions, European regulation has pushed respondents from defined benefit (DB) plans into DC, thereby removing "significant risk" from their balance sheets.

Erik Schouten, co-author of the white paper 'Pensions in Europe', said: "It is clear the pensions landscape in Europe is shifting.

"In such a transitional period, continuing and deepening the dialogue is crucial for all stakeholders - legislators, supervisors, providers and companies.

"Although it may look like something of an impasse has arisen, the European pensions environment is far from static, and we can expect some significant developments over the next year."

While the recent financial turbulence has made it harder for companies to de-risk their DB schemes, it has also confirmed - and possibly even accelerated - the shift to DC, Aegon said.

Its survey also found that European companies were increasingly seeking to develop cross-border plans, which social and labour laws - and the fact regulations are still in disharmony - have hampered, it said.

The authors of the white papers stressed that cross-border IORPs were not merely about harmonising benefits but also centralising control, maximising efficiencies and ensuring a consistent level of quality across a company's pensions in Europe.

They added: "The idea of cross-border pensions has stimulated considerable interest over the past few years, and our survey revealed the concept of cross-border pensions is attractive to most of the companies interviewed.

"However, developments in this area have been slow, which is why the European Commission is looking again at how it can stimulate and facilitate the provision of pensions across borders."

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