Government-led initiatives to boost creation of multiemployer, multicountry retirement plans are opening opportunities for money managers across Europe.
Initiatives are underway in countries including Germany, where a new, pure defined contribution system is being established this year. In France, new legislation will require life insurance companies to segregate their retirement businesses from general account balance sheets and create a new retirement category.
As a result, sources expect more pooled retirement funds across several countries to pop up, including occupational retirement multiemployer frameworks and master trusts. These vehicles will be big enough to create the scale that will allow smaller retirement funds to invest in larger projects such as infrastructure and generate significantly higher returns, supporters hope. In turn, larger pots of money will be seeking asset managers.
One such arrangement, the pan-European, Belgium-based multiemployer DC plan for research employees across Europe — The RESAVER Pension Fund, with an expected asset target of €100 million ($106 million) to €150 million after five years and €500 million to €1 billion after 10 years — launched last week. It currently works with employers in Hungary and Italy.
Similarly, in early 2016, the Netherlands introduced the General Pension Fund APF, a multiemployer plan targeting employers based in different European countries. APF enables smaller retirement funds from different companies and countries to merge in a pooled vehicle — a multiemployer arrangement aimed at achieving economies of scale.
Also fueling expectations is the Directive on Institutions for Occupational Retirement Provision II, which has already prompted the emergence of cross-border plans among larger, multinational companies. Sources think smaller occupational plans will follow the companies' example and consolidate into cross-border plans as well.
“The largest multinationals in the market can use the buying power to consolidate their pension funds in-house,” said Alice Evans, global head of LifeSight strategy and markets at Willis Towers Watson in London. Besides leading LifeSight, the firm's defined contribution multiemployer pension trust, Ms. Evans also leads the firm's European DC business.
“We are definitely seeing a growing a demand for multiemployer, multilocal solutions with consistent offering across territories as an alternative to cross-border plans.”
Paul Bonser, partner in Aon Hewitt's U.K. international retirement practice in London, which advised the European Commission on creating the RESAVER plan, agreed. “In response to market demand, retirement service providers are developing multicountry capabilities, and this trend is expected to gather pace, enabling the coverage of smaller groups of employees in a cost-effective way.”