In a press release on the survey, Deloitte head of pension pooling Gavin Bullock said, “…20% of these were planning to [implement pension pooling] within the next 12 months and a further 33% in the following year.”
Pension pooling allows international businesses with employees across several jurisdictions to establish a pooled pension fund. Instead of holding underlying investments directly themselves, the international pension funds invest into a pooled vehicle which in turn holds the underlying investments on behalf of the pension plans, Deloitte explained in its release.
Bullock said the financial benefits were chosen as the key driver to implementing pension pooling by 87% of survey respondents. He said every respondent chose improved risk management as an important driver of implementation.
Thirty-six percent of multinationals surveyed indicated that withholding tax is not an important consideration when selecting an investment vehicle for their pension plans. However Deloitte expects that as awareness of the tax costs associated with different vehicles becomes better understood by multinationals, tax will become a more important consideration.
According to Bullock, around three quarters of multinationals currently considering pension pooling have total assets in excess of £1 billion, and 80% also had plans in over ten different countries, supporting the assumption that pension pooling benefits larger multinationals more. However, Bullock also notes that smaller plans can often achieve the highest financial benefits from joining a pension pooling program since they are likely to be paying the highest rates of fees and maybe restricted in areas such as manager diversification or yield enhancement strategies including stock lending due to their size.
Bullock said that even though pension schemes of multinationals have typically concentrated on pooling equity investments and bond investments, companies are now showing interest in pooling alternative investments such as real estate, hedge funds, and private equity.
More information can be found at www.deloitte.co.uk .