25/2/2010
By Sophie Baker
Pan-European pension arrangements will be the norm for a third of multi-national companies by 2015, says Hewitt Associates.
New research into the emerging pan-European pensions market shows that over 75 per cent of providers surveyed have already implemented some form of cross-border pension product, and most have undertaken feasibility studies on behalf of multi-national companies.
With the pan-European pensions market growing since the implementation of the EU Pension Directive in 2005, the passport framework that resulted has enabled companies to establish a single pensions vehicle to operate across multiple countries. Both defined benefit (DB) and defined contributions (DC) benefit structures are covered in the Directive.
"The pan-European pensions market is on the cusp of significant growth," commented Paul Bosner, senior international consultant at Hewitt Associates. "Companies have been expressing an interest in consolidating their pension arrangements for some time, but have been somewhat reluctant to be the first to test the water. However, with several companies having now implemented such a vehicle and with a significant number of financial services providers offering or developing new products, the proposition is becoming more feasible. It's clear both from our survey findings and from our own experience of the market that, with several providers and a series of products available, the market-place is becoming more competitive and attractively priced."
Financial services providers can instead opt for the 3rd Life Directive or virtual cross-border pension products which combines local pension products, often with some form of asset pooling. Hewitt's research, however, showed that these two options are unpopular due to practical obstacles around implementation. Only one of the 14 providers participating in the survey preferred to establish a pension arrangement using the 3rd Life Directive.
