Global, multinational corporations are looking closely at their European retirement plans, and increasingly are taking advantage of opportunities to consolidate them.
Costs and low yields are pushing companies to make these changes. Belgium has emerged as a host for cross-border plans, regulated under the Institutions for Occupational Retirement Provisions directive.
“We see an increasing number of multinational companies contacting us to help investigate the feasibility of a cross-border arrangement,” said Thierry Verkest, Diegem, Belgium-based partner at Aon Hewitt. He said the concept is still considered new.
These arrangements allow companies to consolidate their European pension assets into one fund, in one country, and with one regulator. Assets, however, remain ring-fenced so there is no cross-subsidy between each country's plans, and there is no need to change the design of the plan benefits.
“Once in place, it works perfectly well,” said Mr. Verkest. Aon introduced the first cross-border plan about 10 years ago, and now has these types of arrangements in about 10 countries.
On Jan. 1, Irving, Texas-based oil and gas company Exxon Mobil Corp.’s €2.5 billion ($2.6 billion) Dutch and €433 million Belgian plans will consolidate in a cross-border plan in Belgium, Ton van der Linden, Benelux business services manager and treasurer, said in a video interview.
Executives embarked on a project to move the Dutch plan to Belgium about two and a half years ago, a move that will reduce costs by about 35%, he said. And they are not done yet: besides plans in the Netherlands and Belgium, Exxon Mobil operates “quite a number of small pension plans in Europe ... (and) each plan comes with its own costs,” Mr. van der Linden said. Executives will consider “what other countries could we roll in and what would that mean in terms of costs to get it done,” since running such a project also costs money. The benefits of such a move will be analyzed next year.
While the assets of the Dutch plan will move to Belgium under the arrangements, these assets will be legally ring-fenced.