Pan-European and multi-national businesses are increasingly looking to harmonise benefits across territories and strip out costs where possible from their global benefit programmes. However, to our knowledge less than 5 true pan- European pensions schemes have been established utilising the EU directive. Attention to date has been focused on creating single integrated solutions for clients. This attempts to harmonise benefit structures and common administration solutions for multi-nationals, including an offshore fund management hub to power the investment options, and a single administration capability that can operate across multiple currencies, tax and legislative regimes.
So, to understand the issues surrounding pan- European DC pensions (it is considered that DC will be the desired solution) and why more has not been made of this we need to understand the complexity of what lies in front of us.
Clearly legislation and especially tax laws vary considerably regarding the treatment of contributions paid and benefits drawn. The social and labour laws of each member state have an impact on pension provision. There are also various legal requirements including preservation, disclosure and dispute resolution. The regulatory regime in each territory is different, which need to be reflected in any single solution. There are now additional complexities when operating on a cross border basis which can be costly and cumbersome to overcome.
The conclusion we must draw from this is that when you combine all the local regulations, fiscal and pension legislation, of each territory, it significantly multiplies the layers of complication in delivering a harmonised solution. Whilst we believe that the integrated solution is certainly the way forward, and the future for large multi-national businesses to properly harmonise their global or pan-European benefits structures, there could be a simpler tier of provision that could be utilised for smaller companies, perhaps not so geographically spread, or for sections of larger multi-nationals.
One of the challenges is the fundamental ethos behind businesses like AXA which is relationship management. One of the internal issues large multi-national businesses constantly battle with is the parent – child nature of the relationship with a central parent and satellite businesses. The satellite doesn’t always enjoy being imposed upon from a great distance, they like their local relationships, they want people involved who understand their business, their country, people and financial propositions. This therefore can create conflicts in our approach to client management.
In addition, other issues abound on each of the core components of any solutions. As an example, fund management knowledge and understanding, communication styles and financial behaviours can be very different in each territory given the pace of change and different levels of maturity of the markets.
So is there another way?
Some UK Life Offices have global and European scale and reach. Engaging their local offices, their propositions and their sales teams for certain clients with a centralised MI hub positioned in the parent companies’ location may well be a very simple solution for those clients where the barriers of an integrated solution are too great both logistically and financially to consider. In territories not covered (Austria for example in the case of AXA), these can be serviced using a partner from a multi-national pooling network or by discussing with local country connections.
This integrated approach, and the scale of some of the UK’s largest corporate benefits providers, could be a solution that makes financial and logistical sense for the employer.
