The complexity of navigating Europe’s diverse national pension systems is driving up costs for multinationals in the region, according to the first-ever pensions survey of multinational companies published by AEGON. The ‘Bridging Pension Plans Worldwide’ survey suggests that the diversity of pension systems across the European Union is making the region less competitive than their global rivals and accelerating the trend towards relocating jobs outside of the European Union.
The worldwide survey of pension experts provides new evidence that multinational corporations will be looking for more efficient ways to provide retirement benefits to employees. 74 percent of those interviewed would prefer to design and implement their own integrated cross-border corporate pension systems rather than waiting for EU-wide pension legislation to be implemented.
The survey, conducted in conjunction with LIMRA International (the worldwide association of insurance and financial services companies), also highlights an increasing worldwide trend towards transferring a greater degree of financial risks off their own balance sheets and onto individual employees by shifting from defined benefit (DB) plans to defined contribution (DC) arrangements. 61 percent of employers with over 5,000 employees agree that the DB to DC trend is likely to continue around the globe.
The complexity of EU pension plan regulations significantly affects the cost of providing retirement benefits in the EU, according to 91 percent of the pension experts interviewed for the AEGON survey. Furthermore, some 78 percent of the panel of experts said that the higher costs, estimated on average at an additional 7.5 percent in administrative costs for EU-wide pension plans, render European multinationals less competitive and are impeding the creation of new jobs throughout Europe.
“Our survey suggests that multinational employers are seeking a way through the European pensions maze and that they are concerned that complexity is pushing up administration costs,” says Frans van der Horst, the managing director of the AEGON Pension Network. “The absence of integrated cross-border pension systems is seen as a significant obstacle to competitiveness. There is a clear and emerging need for a corporate solution to help multinationals regain their competitive edge and keep costs down. But European insurers are already responding to the challenge and the market is developing solutions. In the absence of a legislative framework towards a unified approach across the EU, multinationals will lead the way in seeking out cost-effective solutions from the market to meet their needs.”