One-third of multinational companies will have cross-border pan-European pension funds by 2015, up from less than 1% now, according to Hewitt Associates.
Consolidating a company's European pension funds will cut costs by streamlining administration, investment and custody fees, said Paul Bonser, principal at Hewitt in London.
To date, only a few companies have taken advantage of new European Union pension laws enacted in 2005 that allow both defined benefit and defined contribution cross-border plans. But interest is building, and a Hewitt survey of 14 pension services providers — mostly large European insurance companies — shows that 75% are developing products that help companies administer pension funds and manage investments.
“This has been a dream for many years” for multinational company executives, Mr. Bonser said. “Now it's starting to become a reality.”
Mr. Bonser said that a company combining five pension funds with total assets of €1 billion ($1.3 billion) could save €1 million to €2 million each year with a cross-border arrangement.