Global Mobility Guide | How important is it to ensure you have a solid pension scheme for globally mobile staff?

How important is it to ensure you have a solid pension scheme for globally mobile staff?
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Paolo Lippi

Paolo Lippi

International Pensions Manager

How to provide pensions for the elderly represents a challenge for businesses and governments. And the solutions offered vary widely between countries. As a result, the provision for the retirement of employees is organised and regulated across different jurisdictions in many ways: ways that are often not particularly consistent with each other.

For example, in the United Arab Emirates (UAE), in addition to end-of-service benefit, many employers offer private pension schemes to their expat workforce, to which both the employer and employee contribute. They are paid in a cash lump sum when the employee retires or leaves the company. However, if a contract is terminated early, the employee may lose the employer contributions.

In Malaysia, private sector employers are required to contribute to a government-established fund that employees may use in part for retirement provision and part for buying a home or emergency medical expenses over the age of 55.

In most other countries, the provision is by way of a pension that is paid out from retirement until death, providing some guaranteed income in old age.

Pension provision is a complex matter and the issues that arise for each country are numerous and varied. Ensuring a compliant solution for those not fiscally located in the country in which they’re working is no mean feat. At the same time, it’s an important consideration for globally mobile workers.

To be able to answer the question above effectively, it’s worth considering all of this alongside what a good pension scheme brings to your people - in terms of security and peace of mind – and to your business in terms of recruitment and retention.

 

Rosemary Lemon

Group Head of reward - Hays


I think there's a genuine problem when people localise in lots of different countries because they end up with little bits of pension in various places. Trying to sort that out when they finally come to retire and working out the tax treatment is quite a big challenge. I think ideally, if it was at all possible, if an employee can remain in their home country’s pension plan that makes life a lot easier all around. Failing that, looking into an international plan so they have the ability to move but retain those benefits would be really useful.

 

David Enser

Founder - The RES Forum


On one hand, a solid benefits offering of course enhances an employer brand and enriches the value proposition that an employer can extend to its international staff. However, on the other hand, it also mitigates risk and potential duty of care issues given increasing employer requirements to ensure employees save for their future - no matter how complex their career paths may be.

An employee who concludes a career at an organisation, for which they have made sacrifices and faced disruptive moves, with a multitude of pension pots and no centralised overview of accrued benefits presents, in my view, a potential legal risk but also constitutes a failure in fulfilling employer obligations in the psychological contract.

 

Mark Bancroft

Head of Global Mobility - Thomson Reuters


From a pension perspective, globally mobile employees are really no different to local employees in that they need to be encouraged to save for retirement. Mobile employees who traditionally have home-based contracts are usually encouraged to stay in their home retirement plan. However, some circumstances mean that this option may not provide adequate retirement savings opportunities through tax efficient savings, or the investment options may be low return. In these situations, and also where a globally mobile employee has no “home base”, it may be appropriate to use an International Retirement Plan, whether that be an insured or trust based arrangement to operate as an ‘umbrella’ plan to support gaps in coverage.


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