That’s especially the case for companies trying to recruit and retain high-level employees.
One emerging answer to the question is the international pension plan.
According to a recent survey by the consultant giant Mercer, employers are beginning to recognize that more flexibility in retirement saving can better provide for the needs of expatriate or “nomad” employees who spend most of their time pursuing a chain of foreign assignments.
A separate survey by Towers Watson found the number of companies using these plans grew by about 10 percent in 2013, to 438.
While they’re multinationals, that’s still a small number, to be sure. In fact, Mercer’s survey found that some 65 percent of multinational companies planned to stay with existing home or host-country pension “provisions.” And only 12 percent of those surveyed by Mercer had launched an IPP, and usually only because there was no other viable option. Seventeen percent said they hadn’t yet considered IPPs or weren’t even aware of their benefits.
Yet, according to the experts, that’s changing.
For starters, countries overseas often don’t offer a supplementary retirement plan such as Social Security, or such plans may be difficult for U.S. employees to take advantage of.
According to Paul Beaton, senior associate in the international consulting group at Mercer, an IPP is “important in countries where there’s no domestic market for pension plans…or no robust regulatory framework in which pensions can operate.”
Africa, the Middle East, and Central and South America can all present such challenges, he said. Those regions happen to represent some of the fastest-growing overseas markets for U.S. employers.
In most of the Middle East, there is simply no pension market. Instead, the region is “dominated by service benefits or termination indemnities — benefits that are paid at separation,” said Beaton.
But unless it’s really rich, a severance benefit doesn’t typically measure up as a retirement plan.
In other countries, notably those in Africa and Central and South America, the issue is that “they simply don’t have the infrastructure, product, providers, (a strong) supervisory regulatory body,” Beaton said.
Michael Broomhead, international consultant at Towers Watson, said that while some large global companies have been dealing with the issue on one way or another for years, those who are just now “becoming more global … are increasingly coming across this challenge.”
“Most companies want to solve that loss of benefit,” said Broomhead.