Regulation, fees and low employee contributions continue to challenge retirement plan executives globally in their efforts for adequate DC plan design, experts agreed during the course of the Oct. 30-Nov. 1 WorldPensionSummit in The Hague, Netherlands.
European experts said the current pan-European regulatory framework, due to labor and taxation powers sitting with individual governments in the European Union, is not sufficient to build a sustainable retirement system. Europe-based speakers also argued that multiple employer, cross-border and multicountry plans should be boosted by supplementary arrangements such as the pan-European pension product.
"When we look at the economic, social and demographic viewpoints — the social security pensions are not sustainable. Something has to give. We need multipillar solutions," warned Janwillem Bouma, chairman of PensionsEurope, a pan-European pensions association.
However, he added, "cross-border solutions will not solve the problem," adding that until pensions and taxation aren't dictated by individual governments, "it is very hard to talk about standard (pan-European) solutions." Panelists said both collective and individual options are equally needed.
Because labor laws and taxation policies are being set by individual European countries, instead of the European Union regulators, plan sponsors who want to broaden the coverage have to opt for a multiple employer and multilocal vehicle that ringfences regional assets into separate compartments.
Olga Ruf-Fiedler, savings and pensions leader for Europe, the Middle East, Africa and India at Dow Chemical Co., said that "managing assets in different locations is cumbersome, expensive and difficult, so there are limited (chances) to leverage scale in terms of fees and administration."
"There is a lack of portability for participants as multinational corporations have to move their employees around a bit. And there is also the inconsistent employees experience ... because each country has different ways to manage their pensions," in how contributions or benefits are taxed, she said.
But a "pan-European vehicle can help maximize retirement outcomes for employees and employers, and achieve economies of scale," she said, speaking at a separate panel from Mr. Bouma.
And a benefit of a multicountry vehicle is "you need one board and one set of legal advisers," she added.
But multicountry platforms pose legal and administrative burdens, too, because executives have to deal with regulation of the platform's home country as well as domestic regulations for each location's sleeve.
"Companies still have to be multilocal," argued Christian Lemaire, global head of retirement solutions at Amundi, speaking on the same panel as Mr. Bouma.
Still, Mr. Lemaire said that "cross-border solutions help to achieve greater control of cost efficiency and a powerful administration tool." Amundi manages €60 billion ($68 billion) in cross-border assets.
But, Hans Van Meerten, professor of international pension law at Utrecht University, said during the same panel that "IORP II, (which boosted cross-border plans) didn't achieve what it was supposed to do" since local governments still retain control.
"We have only few cross-border (vehicles in Europe) because it is harder to operate a cross-border (plan)," Mr. Van Meerten said.
The pan-European pension product "can be a solution to (a savings gap) because the national competence isn't really (an issue, since) it's a third-pillar product," Mr. Van Meerten added.