Pensions pressure mounts on multinationals

Oct 28 2005 by Brian Amble Print This Article

The mounting cost of pension programmes and the increasing complexity of regulations has left more than half of global employers feeling that they lack control over their pension and retirement strategies.

Research by consultants Hewitt Associates found that the financial and regulatory burdens of running retirement programmes has become so great that ensuring that their pension schemes enabled employees to retire comfortably had fallen to the bottom of companies' list of priorities.

The study of more than 100 large, multinational organisations in Europe and North America also found that almost two-thirds do not have annual goals or written global strategies for their retirement plans.

What's more, fewer than half of companies felt that they were "in control" of the many of the key aspects of their pension and retirement : . . . .

These included such fundamentals as aligning their policies with business strategies, managing costs, managing risk and optimising processes.

"I am struck by the evident lack of control reported by many global companies that participated in this survey," said Hewitt Associates' Michael Downing.

"It's been several years now that companies' retirement plans have suffered from some of the worst financial market conditions in our history and, more recently, been impacted by corporate scandals and bankruptcies. Companies need to be farther ahead in managing this volatile aspect of their business."

Most companies in Hewitt's survey identified managing risk and controlling the costs of their global retirement programs as their top two priorities in the coming years.

Almost half identified aligning their retirement programs with overall business strategies as another top priority.

Even among the one in three companies that have established annual retirement goals, the most important consideration was ensuring retirement benefits are affordable, followed by compliance with appropriate laws.

A mere four per cent said that actually enabling employees to retire was a top priority.

"Employee concerns have taken a back seat to cost and risk control," Downing said.

Far more European (42 per cent) than North American companies (28 per cent) reported having written strategies and, in turn, felt more control over managing risk, managing cost and executing globally.

Companies said Europe and North America were their regions causing them the greatest concern, with the USA and UK, together with China and Germany, the countries causing them the biggest headaches.

"In our opinion, the complexities of corporate governance and the increasing movement of employees require more global oversight," Michael Downing added.

"I also am concerned about too much local control over investment policy and strategy, when ultimately, it is an enterprise risk. In order to be more successful in managing a global retirement program, more companies will need to move toward global oversight."

And he added: "it stands to reason that employers who take proactive steps to increase control will achieve better results."