GLOBAL - Companies that tailor their pension benefits to respond to the cuts in public finances occurring across the world will trim costs and give themselves an advantage in the war for talent, Mercer has said. 

In its Annual Benefits around the World report, the consultancy said reform of state pension and health and welfare systems in many countries was creating "significant challenges" for multinational companies looking to manage the cost, risk and competitiveness of employee benefit programmes.

Reforms, prompted by an ageing population and the increasing cost of providing adequate retirement income and health services, are gathering pace in a number of countries including France, the UK, Australia, Canada and the US.
Jean-Philippe Provost, US international consulting group leader at Mercer, said: "Declining public finances has prompted a general retreat in state retirement and health provision - some countries are even looking to their pension and health systems for new sources of revenue.

"Changes vary but include increases in retirement ages, restrictions on tax relief, reductions in benefits and increases in worker contributions. As governments shift the cost of benefit provision from the public sector to the private sector, employers are seeing a significant knock-on effect on the programmes they provide, and employees are left wondering how to fill the gap."
According to Mercer, there is, consequently, a greater appreciation among employees of the value and security of their benefits after two years of economic uncertainty and pay restraint, while many companies still grapple with how to deal with the financial volatility inherent in legacy DB plans.
The consultancy said this situation had been exacerbated in many countries where changes in funding levels and regulatory requirements had a financial impact, leading to a measure of centralisation.

John Hall, Mercer's EMEA international consulting group leader, said: "The increased visibility of retirement and benefit programmes at board and senior management level has encouraged a trend toward increased global oversight and use of frameworks.

"These often include written policies on design, funding and investment, clear delegation of authority and assignment of responsibility related to benefit programmes, and a defined approach to monitoring and mitigating risks."