Plan Sponsors Spurn International Retirement Plan Option

02 August 2012 (PLANSPONSOREurope.com) - Global plan sponsors increasingly spurn international retirement plans in favour of home country plans, according to Mercer.

The research shows plan sponsors favour home country plans, based on the assumption that assignees are more likely to retire in their home countries. Some 63% of traditional and long-term expatriates are maintained in their home country retirement plans.

Meanwhile while an international retirement plan remains a solution, just 12% of companies have established international retirement plans to ensure continuity of benefits.  The most common reasons respondents gave for choosing not to implement an international retirement plan were “insufficient numbers of employees to justify the costs” (38%) and “a combination of home/host-country plan meets needs” (30%). But a significant number (17%) of respondents are unaware of the potential benefits of establishing an international retirement plan or have never considered this as an option.

Mark Price, Principal in Mercer’s International Consulting Group, said “The benefits of keeping expatriates in their home country retirement plan is alignment with employee expectation as they remain in a plan that is known prior to the assignment, and avoidance of benefit fragmentation as benefits continue to accrue under a single plan,” said Price. “However, while this is suitable for short-term and traditional assignees, problems can occur applying these plans to global nomads,” he continued. “Employers can run into problems when it is no longer possible, for a variety of reasons, to maintain assignees in the home country plan. In these circumstances, many employers look for alternative, more flexible solutions.”

“Whilst 12% appears low,” said Price, “it is indicative of the market and we’re actually seeing an increase in the use of such vehicles outside Asia Pacific. They are very effective in providing consistent cover for mobile populations and in jurisdictions where no appropriate plans exist.”

PLANSPONSOREurope Staff
editors@plansponsoreurope.com