Money managers say these changes across the Continent will spur development of cross-border arrangements, which they think are the best fit for multinational sponsors. Multinational companies are expected to bring employees into these new programs sooner than smaller employers.
Amundi has just opened a compartment for Ireland in its cross-border investment vehicle, said Christian Lemaire, global head of retirement solutions at Amundi in Paris.
"This new compartment allows us to expand our multicountry retirement offering. (These developments) are good. With IORP 2, we see more (chances) open for cross-border vehicles," Mr. Lemaire said, referring to 2014 revisions to the Institutions for Occupational Retirement Provision.
Paul Bonser, London-based senior partner who is a board member of United Pensions, Aon's multicountry and multiemployer plan offering with €300 million ($352 million) in assets, said: "One multinational company in the chemicals sector we are working with decided to put its DC assets in a multiemployer plan for the first time because that was the best way for them to improve governance and participant engagement. DC is a scale game — needed to get the right participant outcome."
Mr. Bonser expects cross-border multiemployer or single-country multiemployer plans will work for different DC markets. "For Ireland, as well as for Germany we have launched a single-country master trust," he said. Aon's Ireland DC offering, which is already operational, has €700 million in assets under management.
"For Germany, we are in the process of launching a United Pensions Deutschland, a master trust focused on the German market," Mr. Bonser added.
As recently as in 2017, the German government introduced a defined contribution system that allowed employers to enroll employees into a plans with a defined target return rather than a guranteed return.
The introduction of mandatory DC plans in additional European countries is expected to fuel consolidation, sources said. These new markets will become consolidated at a much quicker pace due to domestic governments permitting only a set number of managers — four to five — that will be allowed to run the new assets throughout a given period of time.
While money managers will still be able to provide investment management services to these providers, savers will instantly benefit from scale.
Jerry Moriarty, CEO of the Irish Association of Pension Funds in Dublin, said that in Ireland, where a voluntary defined contribution system already exists, the auto-enrollment program consultation is running simultaneously with one about consolidating smaller DC plans into multiemployer plans known as master trusts.
"The master trust proposal is almost a copy-paste from the U.K. market. The regulator is looking to raise government requirements, which they say will push (smaller plans) into master trusts," Mr. Moriarty said.
If adopted in the current form, mandatory auto-enrollment will become available in 2022.
In other markets, sources said, changes also indicate a consolidation might be in the cards. The Polish law caps management fees at a monthly fixed rate of 0.5% of net plan assets under management and a yearly investment management fee based on performance to be capped at 0.1% of net plan assets under management.
