One of the most difficult challenges for HR departments is how to equalise retirement benefits across a multinational workforce. This can be achieved using an international group pension scheme.
A company maybe headquartered in, say, the UK but have employees spread around the globe. Each country will have its own rules regarding taxation, state pension systems and accrual of benefits.
Few companies now offer Defined Benefit pension plans to new employees, preferring to run Defined Contribution-based schemes. This helps create equality across multi-jurisdictional businesses and allows companies to be as close as possibleto offering similar benefits to all workers.
The mainproblem is finding a provider who can cope with administering pension plans in different countries, in a variety of currencies and which reflects cultural differences and levels of investment knowledge.
Thankfully,solutions are available: International group pension scheme
The firststep is to decide on the end goal. What would an international group schemelook like in an ideal world? Issues to consider can be summarised as follows:
- Funding level. How much will the company and employee contribute? This is usually a percentage of salary.
- Will bonus payments be included in the salary calculation?
- Can different groups of employees have different funding levels? It may, for example, be desirable to create two or more schemes to cater for enhanced contributions for senior employees. Company pension plans should be designed to help retain and motivate key members of staff as well as the provision of retirement benefits.
- What investment options will be offered for employer and employee accounts? Most companies take a cautious approach with employer contributions but can allow a more adventurous menu of funds for employees who want to have more influence on portfolio allocation with their own money.
- Will the scheme allow one-off lump sum contributions?
- How many currencies can be included in the overall package?
- Can multiple payrolls be accommodated?
- Can employers and employees manage their accounts online? These days, we expect every financial instrument we hold to be viewable on our PC or phone. The technology does exist and can extend to personal details management and educational tools.
- How are benefits accessed at or before retirement? Scheme rules should clearly state how employees can access their money when leaving the company or retiring.Some companies may wish to add restrictions to make sure benefits aren’t accessible too early, which may then run the risk of a member’s fund depleting too quickly.
- Will non-pension benefits be included? Life insurance, health insurance and dependents benefits may need to be available on a mandatory or optional basis.
- Which territories offer pension schemes with sufficient flexibility to create a bespoke plan for employees in various countries? Will tax be payable in the host country?
- Any other features which may be required. Some companies may like to include specific rules. An example would be for employees who leave the company. Can their pension be retained in the scheme, or do they have to withdraw funds and then start again? Short-term contractors might also be included or excluded according to the scheme rules.
The good news is that pension schemes can provide solutions for HR departments and companies looking to establish a multi-jurisdictional retirement benefits plan.
International group pension plans are available and are flexible enough to create a retirement plan according to a company’s specific needs. The key is to design scheme rules that reflect the company and staff’s mutual requirements.
We would be happy to arrange an initial consultation to explore possibilities and begin the process of equalising pension benefits across a global workforce. If you would like to find out more, please complete the form below:
