Of the world's top 500 multinational corporations, 22% will have consolidated as many pension plans as possible by 2011 to reduce costs and improve efficiency, according to a survey sponsored by AEGON.
"Multinational firms have taken the lead in driving cross-border pension integration," according to "Bridging Pension Plans Worldwide," the first-ever worldwide survey on the subject, which involved 115 pension experts in 16 countries and was released earlier this month. "They have influenced the direction of the market into designing and implementing pragmatic solutions for the management of global pension arrangements."
About nine of 10 respondents think the ability to cut costs through consolidation is a key factor that will help the company remain competitive, particularly in Europe and North America. The savings would also help to financially maintain operations that "they might otherwise move to locations with lower labor and pension costs."
Also, 70% of respondents overall and 81% of U.S.-based respondents think that companies with large offshore manufacturing operations are the most likely to take the lead on implementing global pension solutions. Furthermore, such developments could reduce administration costs by 6% to 10%, according to the survey.
Asset-liability management, consolidated investment reporting, asset pooling and streamlined administration contracts were among the most obvious advantages of cross-border pension platforms. However, inconsistent tax codes and other domestic regulatory constraints among different countries pose a significant barrier, respondents said.
In another key finding, 77% of those surveyed said there will be a marked shift in the investment risk from employer to employee over the next five years. The development is bound to make "innovative investment strategies and more alternative asset classes" available in occupational pension plans.
Automatic account management services also featured highly. About 37% of U.S. employers surveyed are considering implementing an automatic rebalancing tool, while 38% are considering investment options designed to simplify the decision-making process for participants, including lifestyle or lifecycle approaches.