Tw actuariaatcongres 2015 vsae

© 2015 Towers Watson. All rights reserved.

The search for operational efficiencyThe trend in pension plans of multinational corporations

Presentation to Actuariaatcongres 2015by Gabe Langerak & Gaston Siegelaer4 March 2015

Disclaimer

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The Presentation was prepared for the Actuariaatcongres 2015’s sole and exclusive use and on the basis agreed with you. It was not prepared for use by any other party and may not address their needs, concerns or objectives. The Presentation should not be disclosed or distributed to any third party unless agreed by Towers Watson in writing. Towers Watson assumes no responsibility, or accepts any duty of care or liability to any third party who may obtain a copy of this Presentation and any reliance placed by such party on it is entirely at their own risk.

Which borders are fading…?

• Changing pension landscape in Europe• Changes driven by national changes• Cross-border effects through operational efficiencies

• ‘One Europe’?

• Current and Emerging Themes• What do you know about multinational corporations’ pension

benefits?

• What about cross-border solutions?


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Survey participant profileSource: Towers Watson Priorities for 2015 pulse survey; 313 responses

Fewer than 5,000

11%

5,000 to 9,99913%

10,000 to 19,99916%

20,000 to 49,99922%

50,000 to 99,99918%

100,000 or greater

20%

How many employees does your organization have worldwide?

Asia Pacific

6%

EMEA50%

Latin America

5%

North America

39%

Location of survey participants, by region

Fewer than 1,000

9%

1,000 to 4,99919%

5,000 to 9,99916%10,000 to

19,99914%

20,000 to 49,99918%

50,000 to 99,99914%

100,000 or greater

10%

How many employees does your organization have outside your

headquarters country?

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Survey participant profileSource: Towers Watson Priorities for 2015 pulse survey; 313 responses

24%

49%

9%

3%

2%

1%

1%

2%

2%

3%

4%

Rewards

Pensions/Benefits

Compensation

Talent development/management

Health/Wellness

Accounting/Controlling

Treasury

Risk management

Corporate finance

Corporate strategy

Other HR

Other

Which of the following best describes your functional responsibility?

6%6%

1%7%

3%3%

7%1%

9%3%

2%7%

6%2%

10%

5%3%

5%6%

5%3%

Automobiles and ComponentsBanks

Capital GoodsCommercial and Professional Services

Consumer DurablesDiversified Financials

EnergyFood/Staples Retailing

Food, Beverage and TobaccoHealth Care Equip/ServicesHotels/Restaurants/Leisure

Household/Personal ProductsInsuranceMaterials

MediaPharma/Biotechnology

Real EstateRetailing

SemiconductorsSoftware and Services

Technology Hardware/EquipTelecommunication Services

TransportationUtilities

Which best describes your organization's primary

business/industry

Global66%

Regional -Americas

10%

Regional -Asia

Pacific3%

Regional -Europe, Middle

East and Africa15%

Other6%

Which of the following best describes your scope of

responsibility?

5

* Less than 0.5 percent

*

*

*

* Less than 0.5 percent

*

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What do you know about multinational corporations’ pension benefits?

Intermezzo: A quiz

To what extent do you agree or disagree with the followingstatement about multinational corporations (MNC’s)?

Global governance/oversight of pensions/employee benefits is still new for MNC’s


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Agree Disagree

Influences for 2015

8% 23% 15% 40% 14%

Global governance/oversight ofpensions/employee benefits is still

new for our organization

To what extent do you agree or disagree with the following statements:

Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree

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Base: Total Respondents n = 313

54%


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HQ/Regional HQ involvement in pensions/employee benefits is increasing (relative to local)


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Agree Disagree

Influences for 2015

16% 55% 19% 8% 2%

HQ/Regional HQ involvement inpensions/employee benefits is

increasing (relative to local)



10


71%


10


Pressure to do more with less is increasing


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Agree Disagree

Influences for 2015

28% 47% 19% 6%

Pressure for us to domore with less is

increasing



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75%


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Managing financial risks (e.g. defined benefit pension plans) still dominates the time/focus


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Agree Disagree

Influences for 2015

9% 41% 26% 21% 3%

Managing financial risks (e.g.,defined benefit pension plans) still

dominates our time/focus



50%

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Influences for 2015Operational efficiency… with greater HQ involvement

8%

16%

28%

9%

23%

55%

47%

41%

15%

19%

19%

26%

40%

8%

6%

21%

14%

2%

3%

Global governance/oversight ofpensions/employee benefits is still new

for our organization

HQ/Regional HQ involvement inpensions/employee benefits is

increasing (relative to local)

Pressure for us to do more with less isincreasing

Managing financial risks (e.g., definedbenefit pension plans) still dominates

our time/focus



15



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Pulse survey highlights

In 2015, global/regional benefit managers expecting/saying…

• Increasing HQ/regional HQ involvement• Focus: 63% on global control and oversight (33%) and financial management• Time: 72% of time on “project” type activity• Pressure to “do more with less” to increase• Country priorities:

• Financial or strategic benefit review (top being UK, US)• Legislative developments (e.g. Netherlands)• Operational reasons (e.g. Brazil, China, India)


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• Significant value added opportunities exist, but• Reality is likely to fall short of ambition unless HQ benefit managers can find

ways to:• (i) be more effective in deploying existing resources, and/or• (ii) obtain additional resources, either internally or externally

Impact on pension plan design: The Netherlands

Improve operational efficiency• Economies of scale – be smart!• Outsourcing• Eliminating complexity

Plans than can be easily outsourced• Copy industrywide plan• DC plan

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Now… what about cross-border solutions?

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Multinational companyEurope (and beyond)

Example – Concept of a cross-border plan with an IPP

Biggest challenge: Understand and administering social, labour and tax law

Respects ESP tax, labour, social law

ESP Section NL Section

Respects NL tax, labour, social law

IPP Section

Respects LUX and other jurisdictions’ tax, labour, social law

Respects IRL tax, labour, social law

IRL Section

* Institution for Occupational Retirement Provision, under EU Directive

Cross-border IORP* Located and regulated in one EEA state, e.g. Luxembourg (Home State)

• Single license, supervision, regulations, funding.• Single Fund – with sections.

Host state sections

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Bettergovernance

Consistencyin design

Mobileworkforce

Employercost savings Lower charges

for employees

Singleadministrator

Consolidatedinvestments

Supportsmore

centralisedservices

(HR/finance)

Pooling ofdeficit / surplus

Home for“orphaned”

liabilities

More effectivesolutions for

small countries

Crisiscountries

Why have companies looked at cross-border vehicles?

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Official current state of play – 86 IORP’s according toEIOPA – including companies like BP, Nestlé and Unilever

AustriaBelgiumGermanyIrelandLiechtensteinLuxembourgNorwayUK

AustriaBelgiumCyprusCzech RepFranceGermanyGreeceHungaryIreland

Countries where a cross-border planhas been based

Countries which have been included in cross-border plans

LiechtensteinLithuaniaLuxembourgMaltaNetherlandsSpainSwedenUKand Non-EEA sections

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IORP’s – Current State of Play

Regulatory features generally understood

Slow development of administration

EIOPA and EC harmonisinginterpretations

DC benefits – realistic solution for IMEs, but…

DB plans…

Using individual country capabilities

lIORP II

Few multi country call centres

Not easily scalable

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Is a Dutch pension fund expensive and complicated … … consider moving it to Belgium!

l Increasing interest in moving Dutch pension plans to Belgium througha cross-border IORP:l New FTK in the Netherlands provides insufficient benefitsl Several companies have already ‘paved the way’

l Benefits of a Belgian cross-border IORPl Greater flexibility in setting contributions and pension increases due to more

lenient (or perhaps just less stringent!) rulesl Broader possibilities for governancel Possibility of multinational pension pooling

l Points to note:l Dutch social, tax and labour laws remain applicablel How will you get buy-in from all stakeholders?

PPI’s:Cost efficient vehicles to execute DC plans


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Asset management fees of PPI’s in the range of0.35% - 0.55%

Compare:l Average of 217 Dutch pension fund: 0.54%l Two largest pension funds (ABP, PFZW): 0.69%

Easier to integrate multinational plansl Multinational corporation can establish its own PPI


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Tw actuariaatcongres 2015 vsae