The 2006 Mercer Global HR Conference: The Effective Global Workforce in Washington, DC, on 5-7 December 2006 will feature Mercer consultants and clients providing insights on current business themes. This interview with Mercer's Mark Sullivan highlights key points from his workshop - Managing pan-European benefits .

Q. What are some of the key drivers towards the establishment of a truly pan-European approach to pensions?

A. “Three catalysts towards the development of pan-European pensions strategy include:
 

• Increased focus on governance and oversight of pension arrangements.
  
• The ability to leverage regional economies of scale rather than just looking at local employee populations.
  
• Reinforce corporate branding by having consistent benefit designs (although benefit levels will differ).”

Q. Tax obstacles are traditionally seen as one of the main barriers to pan-European pension funds. How is this issue being addressed and what are the remaining tax hurdles for companies wishing to establish pan-European pension funds?

A. “Discriminatory tax treatment (where pensions are taxed differently by a Member state depending on which state the plan is in) are being addressed by the European Commission.

Uninformed pundits claim that as tax is not harmonised, then one pension plan is not an option. However investment managers and custodians are able to deal with tax differences by having a tax transparent vehicle which then removes any tax obstacle.”

Q. Which countries are most active in the pan-European pensions market and how can we learn from their experiences?

A. “Luxembourg and Ireland are the most active countries, although many others claim to be targeting this market including the UK, Belgium and the Netherlands.

The market is still evolving, with the main focus to date being on pooling assets across the regions. A number of providers are looking at packaged solutions but we have not seen anything more concrete at this stage.”

Q. How do you think the pan-European pensions market will change over the next five years?

A. “In 2007 we will see the first company-sponsored pension vehicle which has members from more than one Member State (ignoring special populations or transfers where such plans already exist).

As the market develops more companies will take advantage of asset pooling vehicles, although this is only suited to the larger funds. We also expect to see a number of players entering the pan-European market with packaged solutions bundling together investment, administration and design.”

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