GLOBAL - Multinational companies should try to centralise their pension expertise to better manage their liabilities, according to PricewaterhouseCoopers (PwC).
They should also consider improving efficiency through joint investment policies and risk management, and using the benefits of scale through collective international contracts to manager their wide range of pension arrangements, the consultancy said.
PwC's recommendations followed an analysis of pension liabilities for the 25 companies in the Amsterdam Exchange index (AEX).
The survey found that the companies' pension funds had a combined shortfall of €18.1bn at the end of 2009 after their sponsors made worldwide additional contributions of €7.1bn the previous year.
PwC said: "In addition to every euro paid for new pension accrual during the last five years, the AEX companies paid at least another euro to meet their commitments from the past."
Since 2004, the companies spent less than 50% of their contributions for new pension accrual, and a steadily increasing amount has been needed to account for shortfalls, it added.
Mischa Borst, partner within PwC's pension services, said: "The increase of returns on investments in 2009 have been undone by the drop in long-term interest rates that pension funds must apply for discounting their liabilities."
He said he expected a decrease of total pension costs for AEX companies this year, followed by another rise, caused in particular by new accounting rules arising from the International Accounting Standards Board in 2011, which will "prescribe a downgrade of future returns on investments".
He added: "Our expectation is that companies will need to fully factor in shortfalls on their balance sheets as well."
Earlier research carried out by PwC showed 94% of Dutch employers believed they were responsible for providing proper pension facilities for their workers, yet 83% conceded they lacked the motivation to do so due to the high costs involved.